**EXHIBIT10.7**

INTERCOMPANY CREDIT AGREEMENT

This INTERCOMPANY CREDIT AGREEMENT (this “Agreement”) by and between ApolloResources International, Inc., a Utah corporation (“ARI”), and Earth Biofuels,Inc, a Delaware corporation (“EBF”), is effective as of January 1, 2006.

ARTICLE IDEFINITIONS

SECTION 1.01 DEFINITIONS. The following terms, as used herein, have thefollowing meanings:

(a) “ADVANCE” means, an advance by ARI, asapplicable, pursuant to Section 2.01 or 2.02, which shall include, withoutlimitation, advances by ARI to EBF or on behalf of ARI and amounts owed by EBFand its Subsidiaries for fees, costs and expenses between the parties.

(b)  “EBF BALANCE” means, with respect to anInterest Period, the net daily balance of funds owed by EBF to ARI as set forthin the intercompany account maintained by EBF pursuant to Section 2.05 hereof.

(c)  “CODE” means, the Internal Revenue Code of1986 as amended.

(d)  “ARI BALANCE” means, with respect to anInterest Period, the net daily balance of funds owed by EBF to ARI as set forthin the intercompany account maintained by ARI pursuant to Section 2.05 hereof.

(e)  “ERISA” means, the Employee Retirement IncomeSecurity Act of 1974, together with all amendments from time to time thereto.

(f)  “ERISA AFFILIATE” means, any trade orbusiness (whether or not incorporated) which is under common control with EBFwithin the meaning of the regulations promulgated under the Internal RevenueCode of 1986 as amended.

(g)  “EVENT OF DEFAULT” means, any materialdefault of the terms of this Agreement.

(h)  “INDEBTEDNESS” means, with respect to anyPerson at any time, without duplication, all obligations of such Person which,in accordance with generally accepted accounting principles, consistentlyapplied, should be classified as liabilities on a consolidated balance sheet ofsuch Person prepared in accordance with generally accepted accountingprinciples, consistently applied, but in any event shall include: (a) allobligations of such Person for borrowed money, (b) all obligations of suchPerson evidenced by bonds, debentures, notes or other similar instruments, (c)all obligations of such Person upon which interest charges are customarily paidor accrued, (d) all obligations of such Person under conditional sale or othertitle retention agreements relating to property purchased by such Person, (e)all obligations of such Person issued or assumed as the deferred purchase priceof property or services (other than accounts payable on normal payment terms tosuppliers incurred in the ordinary course of business), (f) all obligations ofothers secured by any Lien on property owned or acquired by such Person,whether or not the obligations secured thereby have been assumed, (g) allcapitalized lease obligations of such Person, (h) all obligations of anypartnership or joint venture as to which such Person is or may becomepersonally liable, (i) all guarantees by such Person of Indebtedness of others,and (j) all contingent obligations of such Person.

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(i)  “INTEREST PERIOD” means, the periodcommencing on the date of an Advance and ending on the date the Advance ispaid.

(j)  “INTEREST RATE” has the meaning ascribed toit in Section 2.02.

(k)  “INVESTMENT” means, any investment in anyPerson, whether by means of share purchase, capital contribution, loan orotherwise; in determining from time to time the amount of Investments, sharepurchases and capital contributions shall be taken at the original cost thereofregardless of any subsequent appreciation or depreciation therein and loans shallbe taken at the principal amount thereof remaining unpaid.

(l)  “LIEN” means, any security interest,mortgage, pledge, lien, charge, encumbrance, title retention agreement oranalogous instrument, in, of, or on any of the assets or properties, now ownedor hereafter acquired, of EBF or any Subsidiary, whether arising by agreementor operation of law.

(m)  “PERSON” means, any natural person,corporation, partnership, joint venture, firm, association, trust,unincorporated organization, government or governmental agency or politicalsubdivision or any other entity, whether acting in an individual, fiduciary orother capacity.

(n)  “SUBSIDIARY” means, any corporation amajority of the shares of the outstanding stock of which have ordinary votingpower for the election of directors is owned by EBF, either directly or throughone or more of its Subsidiaries.

ARTICLE IIADVANCES AND CASH MANAGEMENT

SECTION 2.01 ADVANCES FROM ARI TO EBF.  Any funds of ARI and its Subsidiaries that are not required to meet thedaily cash requirements of ARI and its Subsidiaries will be transferred to EBFthrough a concentration account on a daily basis as an Advance hereunder and/orapplied, at the discretion of ARI, to decrease the outstanding balance ofAdvances from EBF pursuant to Section 2.02, as applicable.  Any funds transferred from ARI to EBF will bedeemed as either an Advance to EBF, if there are no outstanding Advances from EBFto ARI, or a decrease of Advances from EBF to ARI, if such Advances exist.  Any interest payable by EBF on an Advancefrom ARI (other than interest payable upon or after termination of thisAgreement) shall be treated (effective as of the first day of the followingInterest Period) as an Advance from ARI for the purposes of thisAgreement.  Each Advance by ARI underthis Section 2.01 shall be deemed to be made by ARI notwithstanding the factthat such Advance may involve cash of one or more Subsidiaries of ARI. Allfunds which constitute Advances to EBF pursuant to this Section 2.01(and notdecreases in Advances from EBF to ARI) shall bear interest at the Interest Rateprovided for in Section 2.02.

SECTION 2.02 INTEREST.

(a)  Subject to the other provisions of thisSection 2.03, interest shall accrue on Advances at the rate (the “Interest Rate”)of seven per cent (7%). Interest shall be calculated on the basis of a 360 dayyear for the actual number of days elapsed. Interest payments for Interest Periods ending (i) prior to the terminationof this Agreement shall be treated as Advances pursuant to Sections 2.01

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and2.02 herein, as applicable, on the first day of the following Interest Periodand (ii) on the termination of this Agreement shall be payable immediately(each an “Interest Payment”).

(b)  The interest payable by EBF under thisAgreement shall be calculated by multiplying the Interest Rate by the EBFBalance for the applicable days in the Interest Period.  The interest payable by ARI under thisAgreement shall be calculated by multiplying the Interest Rate by ARI Balancefor the applicable days in the Interest Period. The Interest Payment required to be made by each party is independent ofthe Interest Payment required to be paid by the other party, and interest maybe paid by both EBF and ARI for any given Interest Period.  EBF shall calculate the amount of interestpayable by both EBF and ARI for each Interest Period and, upon request, shallprovide notice thereof to ARI, together with supporting calculations.

(c)  All calculations shall be performed by EBF.

SECTION 2.03  REPAYMENT.  During the term of this Agreement, all Advancesreceived by ARI from EBF shall be offset against and shall be treated as repaidto the extent of any Advances made by such party.  Repayments can be made at any time by either partywith interest payable up to the date of repayment.  No prepayment penalty may be levied.  Upon termination of this Agreement, anyAdvances that have not theretofore been repaid, together with accrued interest,will be payable in full immediately following termination of this Agreement.

SECTION 2.04  INTERCOMPANYACCOUNT.  EBF shall maintain a ledger in whichall ARI Advances and all repayments of such Advances shall be recorded.  EBF shall give ARI access, during normalbusiness hours, to such ledger and the other records relating to Advances andpayments made with respect thereto. EBF shall have until the 30th day followingthe end of each Interest Period to make any calculations required to be made byit under the provisions of this Agreement.

SECTION 2.05 TRANSFERS OF FUNDS. All transfers of funds between EBF and ARI will be initiated by EBFTreasury.  All funds will be transferredthrough intercompany accounts, or as otherwise agreed by the parties.

SECTION 2.06 TAXES.  If ARI or EBFshall be required by law to deduct any tax from or in respect of any sumpayable hereunder to the other party: (a) as soon as such party is aware thatany such deduction, withholding or payment of a tax is required, or of anychange in any such requirement, it shall notify the other party; (b) such partyshall make such deductions, or pay such tax, before any interest or penaltybecomes payable; (c) such party shall pay the full amount deducted to therelevant taxing authority or other authority in accordance with applicable law;and (d) within thirty (30) days after paying such tax, such party shall deliverto the other party satisfactory evidence of that deduction, withholding orpayment and (where remittance is required) of the remittance thereof to therelevant taxing or other authority.

SECTION 2.07 USURY. All agreements between the parties, whether now existingor hereafter arising and whether written or oral, are hereby limited so that inno contingency, whether by reason of demand for payment or acceleration of thematurity hereof or otherwise, shall the interest contracted for, charged orreceived by either party exceed the maximum amount permissible under applicablelaw. If, from any circumstance whatsoever, interest would otherwise be payableto either party in excess of the maximum lawful amount, the interest payable tosuch party shall be reduced to the maximum amount permitted under applicablelaw; and if from any circumstance either party shall ever receive anything ofvalue deemed interest by applicable law in excess of the maximum lawful amount,an amount equal to any excessive interest shall be

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appliedto the reduction of the principal hereof and not to the payment of interest, orif such excessive interest exceeds the unpaid balance of principal hereof suchexcess shall be refunded to the party deemed to have made such payment.  All interest paid or agreed to be paid toeither party shall, to the extent permitted by applicable law, be amortized,prorated, allocated, and spread throughout the full period until payment infull of the principal (including the period of any renewal or extension hereof)so that the interest hereon for such full period shall not exceed the maximumamount permitted by applicable law. This paragraph shall control all agreementsbetween the parties.

ARTICLE IIICOVENANTS OF EBF

Untilthe repayment of all Advances under this Agreement, EBF will:

SECTION 3.01  CORPORATEEXISTENCE.  Maintain, and, except asprovided in Section 3.7 hereof, cause each Subsidiary to maintain, (a) itscorporate existence in good standing under the laws of the jurisdiction of its incorporation,(b) its right to transact business in each jurisdiction in which the characterof the properties owned or leased by it or the business conducted by it makessuch qualification necessary and the failure to so qualify would permanentlypreclude EBF or such Subsidiary from enforcing its rights with respect to anymaterial assets or expose EBF or such Subsidiary to any material liability and(c) conduct and operate its business in a lawful manner as presently conducted.

SECTION 3.02  COMPLIANCE WITHLAWS, ETC.  Comply, and cause each Subsidiaryto comply, in all material respects with all applicable laws, rules,regulations and orders (including without limitation Regulation X of the Boardof Governors of the Federal Reserve System), such compliance to include,without limitation, paying before the same become delinquent all taxes,assessments and governmental charges imposed upon it or upon its propertyexcept to the extent contested in good faith by appropriate proceedings and forwhich adequate reserves have been established.

SECTION 3.03  INSURANCE.  Maintain, and cause each Subsidiary to maintain,in full force and effect insurance comparable to present policies in amountsand risks covered plus such additional insurance, if any, as may from time totime be required to provide coverage customarily maintained by similarlysituated companies.

ARTICLE IVADMINISTRATION

SECTION 4.01 LIMITATIONS ON LIABILITY. Neither party shall have any liability under this Agreement (includingany liability for its own negligence) for damages, losses or expenses(including expenses or higher interest rates incurred in order to obtainalternative financing sources) suffered by the other party or its Subsidiariesas a result of the performance or non-performance of such party’s obligationshereunder, unless such damages, losses or expenses are caused by or arise outof the willful misconduct or gross negligence of such party or a breach by suchparty.  In no event shall either partyhave any liability to the other party for indirect, incidental or consequentialdamages that such other party or its Subsidiaries or any third party may incuror experience on account of the performance or non-performance of such party’s

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obligationshereunder. The provisions of this Section 4.01 shall survive any termination ofthis Agreement.

SECTION 4.02 TERM OF THE AGREEMENT. This Agreement commences on the effective date of this Agreement as setforth above and will continue in effect until December 1, 2012. Notwithstandingthe foregoing, this Agreement may be sooner terminated, without liability to theterminating party:

(a)  after five years (5) by either party, upon 90days’ notice to the other party, if ARI ceases to own, directly or indirectly,50% or more of the outstanding stock of EBF;

(b)  by either party, immediately upon notice tothe other party, if (i) that other party makes a general assignment of all orsubstantially all of its assets for the benefit of its creditors; (ii) thatother party applies for, consents to or acquiesces in the appointment of areceiver, trustee, custodian or liquidator for its business or all or substantiallyall of its assets; (iii) that other party files, or consents to or acquiescesin a petition seeking relief or reorganization under any bankruptcy orinsolvency laws; or (iv) a petition seeking relief or reorganization under anybankruptcy or insolvency laws is filed against that other party and is notdismissed within 90 days after it was filed;

(c)  by either party, immediately upon notice tothe other party, if that other party’s material breach of this Agreementcontinues uncured or uncorrected for 30 days after both the nature of thatbreach and the necessary cure or correction has been agreed upon by the partiesor otherwise determined by the dispute resolution procedure described in Section3.01; provided that if the parties agree or it is determined by the disputeresolution procedure that the material breach is not capable of being cured orcorrected, the termination shall be effective immediately upon notice;

(d)  by either party, immediately upon notice tothe other party, if it determines that performance of its rights or obligationsunder this Agreement is or becomes illegal;

(e)  by either party, immediately upon notice tothe other party, if payments made by the other party are subject to anydeduction or withholding for or on account of any tax, unless the other partyagrees to increase its payments such that, after all required deductions have beenmade, the party receives a net amount equal to the sum it would have receivedhad no such deductions been made; or

(f)  by either party, immediately upon notice tothe other party, if it determines that its compliance with any law orregulation or any guideline or request from any central bank or governmental orregulatory authority would create a cost or increase the cost of providingcredit under this Agreement, unless the other party agrees to pay amountssufficient to indemnify for such cost or increase in cost.

SECTION 4.03  RENEWAL.  The parties may consent to successiveone-year renewal terms.  If EBF wishes torenew the term of this Agreement, it shall provide notice to ARI of that desireby November 15, 2007 and the same date of each subsequent year. If ARI consentsto such renewal, it shall provide notice to EBF of that concurrence by November20, 2007 of that year. If no notice of desire to renew or subsequent consent isgiven, this Agreement will terminate when the then current term expires.

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SECTION 4.04  NO THIRD-PARTYBENEFICIEBFES.  Nothing expressed or impliedin this Agreement shall be construed to give any person or entity other than theparties hereto any legal or equitable rights hereunder.

SECTION 4.05  ENTIREAGREEMENT.  This Agreement constitutesthe entire agreement of the parties on this subject.  This Agreement replaces and supersedes anyprior agreement or understanding of the parties, whether written or oral, onthis subject not expressed or referred to in this Agreement.

SECTION 4.06  AMENDMENT.  This Agreement may not be amended except by awritten instrument signed by the parties hereto.

SECTION 4.07 WAIVERS.  Eitherparty hereto may (a) extend the time for performance of any of the obligationsor other act of the other party or (b) waive compliance with any of theagreements contained herein. No waiver of any term shall be construed as awaiver of the same term in any other situation or a waiver of any other term ofthis Agreement. The failure of any party to assert any of its rights hereunderwill not constitute a waiver of any such rights.

SECTION 4.08  SEVERABILITY.  If any provision of this Agreement is invalid,illegal or incapable of being enforced by any rule of law or public policy,such provision shall be deemed severable and all other provisions of thisAgreement shall nevertheless remain in full force and effect.

SECTION 4.09  HEADINGS.  Section headings in this Agreement areincluded herein for convenience of reference only and shall not constitute apart of this Agreement for any other purpose.

SECTION 4.10 NOTICES.  All notices and othercommunications hereunder shall be in writing or by telecopy, and shall bedeemed to have been duly made when delivered in person or sent by telecopy,same day or overnight courier, or 72 hours after having been deposited in theUnited States registered or certified mail return receipt requested, postageprepaid, to a party at the address last known.

SECTION 4.11  GOVERNING LAW.  This Agreement shall be governed by and construedin accordance with the substantive laws of the State of Texas, without givingeffect to any choice-of-law rules that may require the application of the lawsof another jurisdiction.

SECTION 4.12  CHANGES INLAW.  If at any time due to the adoptionof any law, rule, regulation, treaty or directive, or any change therein or inthe interpretation or administration thereof by any court, central bank, governmentalauthority, agency or instrumentality, or comparable agency charged with theinterpretation or administration thereof, or for any other reason arisingsubsequent to the date of this Agreement, it shall become unlawful orimpossible for ARI to make any Advance, the obligation of ARI to provide suchAdvances shall, upon the happening of such event, forthwith be suspended forthe duration of such illegality or impossibility.  If any such event shall make it unlawful orimpossible for ARI to continue any Advances previously made by it hereunder, ARIshall, upon the happening of such event, notify EBF thereof in writing, and EBFshall, at the time notified by ARI, repay such Advances in full, together withaccrued interest thereon.

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SECTION 4.13  COUNTERPARTS. ThisAgreement may be signed in any number of counterparts, with the same effect asif all signatories had signed the same document.  All counterparts shall be construed togetherto constitute one, and the same, document.

INWITNESS WHEREOF, EBF and ARI have caused this Agreement to be executed as ofthe date first above written.

APOLLORESOURCESINTERNATIONAL, INC.

 
| By:                            | /s/ DENNIS G. MCLAUGHLIN, III |   |
|--------------------------------|-------------------------------|--------|
|                           | Dennis G.  McLaughlin, III    |
|                           | Chief Executive  Officer      |
|                           |                          |
|                           |                          |
| EARTH BIOFUELS, INC.           |
|                           |                          |
|                           |                          |
| By:                            | /s/ DARREN MILES              |   |
| Name: Darren Miles             |
| Title: Chief Financial Officer |
|                                |                               |        |  |  |

 

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