Exhibit 10.12

                 SECURITY DEPOSIT PAYMENT FORBEARANCE AGREEMENT

     THIS Agreement,  effective as of the Eighth day of June,  2004  ("Effective
Date"), is between Successor in Interest to MTC (herein referred to as Successor
in  Interest  to MTC),  a  corporation  of the  State  of New York and  Imperial
Petroleum  Recovery  Corporation  (herein referred to as IPRC), a company formed
under the laws of Nevada.

     WITNESSETH THAT:

     WHEREAS,  Mobil  Technology  Company  ("MTC")  and  IPRC  entered  into  an
agreement, effective October 6th, 1999 ("Prior Agreement") pursuant to which MTC
provided IPRC with security  deposit of one million  United States Dollars (U.S.
$1,000,000) ("Security Deposit); and

     WHEREAS, the Prior Agreement terminated on October 6, 2001; and

     WHEREAS,  IPRC was to repay the Security  Deposit on August 10, 2003, which
obligation survived termination of the Prior Agreement; and

     WHEREAS,  IPRC has not repaid the Security Deposit as of the effective date
of this  Agreement  and is currently in default of its  obligation  to repay the
Security Deposit under the Prior Agreement and as a result of such default, IPRC
further  owes  interest  on the  Security  Deposit  as  specified  in the  Prior
Agreement, which obligation further survived termination of the Prior Agreement;
and

     WHEREAS,  the right  under the Prior  Agreement  to  receive  the  Security
Deposit and accrued  interest  from IPRC was  assigned  from MTC to Successor in
Interest  to MTC on  December  6,  2002  and as a  result  of  that  assignment,
Successor in Interest to MTC is a secured creditor of IPRC; and

     WHEREAS,  to avoid  creating a situation  that could cause IPRC to file for
bankruptcy,  Successor in Interest to MTC is willing to forebear its  collection
of the  Security  Deposit  as a single  payment  and to  allow  IPRC to make six
payments  totaling one million  United States  Dollars  (U.S.$1,000,000)  as set
forth herein and further, if IPRC makes all of such Security Deposit payments on
or before the  specified  timetable,  Successor in Interest to MTC is willing to
forgive the accrued interest on the Security Deposit.

     NOW,  THEREFORE,  in  consideration  of the  premises  and  of  the  mutual
covenants herein contained, the parties hereto agree as follows:

                                    ARTICLE I

     1.01 Terms defined in this Agreement  shall have the  definitions  provided
herein.  Terms not defined in this Agreement  shall have the meaning defined for


<PAGE>


them in the Prior  Agreement.  In the event of any conflict between the terms of
this  Agreement  and the  Prior  Agreement,  the terms of this  Agreement  shall
control.

                              ARTICLE II- PAYMENTS

     2.01 As used herein,  "Financial  Trigger  Event" shall mean the  effective
date of the first  agreement  between IPRC (or any affiliate,  agent or licensee
with  rights to  sublicense  MST) and any third  party for the lease,  sale,  or
license  of one or more MST  Units  after the  Effective  Date.  IPRC  agrees to
promptly notify  Successor in Interest to MTC in writing of the execution of any
agreement on or before October 31, 2004 between IPRC or any affiliate, agent, or
licensee with rights to sublicense MST and any third party for the lease,  sale,
or license of one or more MST Units.

     2.02 Provided that the Financial  Trigger Event occurs on or before October
31, 2004,  Successor in Interest to MTC and IPRC agree that the Security Deposit
payment  schedule is changed from that specified in Sections 6.3, 6.4 and 6.5 of
the Prior  Agreement to that  specified  below.  Payment will be made by IPRC to
Successor in Interest to MTC according to the specified schedule and no invoices
will be required  from  Successor in Interest to MTC to IPRC before  making such
payments.

          Until lPRC shall fully repay the  Security  Deposit,  thirty (30) days
after the conclusion of each calendar quarter (January to March,  April to June,
July to  September  and October to December  or any portion  thereof)  after the
Financial  Trigger  Date,  IPRC shall pay  Successor in Interest to MTC at least
Sixty Thousand  United States Dollars  (U.S.$60,OOO.00)  for each MST Unit sold,
leased or  licensed  after  the  Financial  Trigger  Date.  Failure  to make the
specified  payments on time shall be a default.  Examples of the  application of
this payment schedule are shown in Appendix I.

     2.03 If the Financial  Trigger  Event occurs on or before  October 31, 2004
and IPRC  repays the entire  Security  Deposit on or before  December 1, 2005 as
specified  in Section  2.02,  Successor  in  Interest  to MTC will  forgive  any
interest accrued and due under the Prior Agreement, however if anyone or more of
the  payments  called for in Section  2.02 are not made as  specified  or if the
Security  Deposit  was not  entirely  repaid by  December  1,  2005,  IPRC shall
continue to be obligated to pay the  Security  Deposit  payments as specified in
Section 2.02 and shall pay Successor in Interest to MTC interest on the Security
Deposit as follows:

          Interest due on the Security Deposit, including accrued interest, from
August  10,  2003 up to the date  IPRC pays the  Security  Deposit  and  accrued
interest  in full will be charged  upon the  unpaid  Security  Deposit  plus any
accrued interest at a rate equal to the prime rate of Citibank (New York) at the
close of business on the last  business  day of the  calendar  year  immediately
preceding each  respective year (or portion  thereof) that the Security  Deposit
remains unpaid,  plus four percent (4%) per annum. The interest will be added to
the amount that IPRC owes Successor in Interest to MTC.


<PAGE>


     2.04 If the Financial Trigger Event does not occur on or before October 31,
2004, IPRC shall continue to be obligated to pay the Security Deposit, including
accrued  interest,  charged  upon the unpaid  Security  Deposit plus any accrued
interest,  at a rate equal to the prime rate of Citibank (New York) at the close
of business on the last business day of the calendar year immediately  preceding
each  respective  year (or portion  thereof) that the Security  Deposit  remains
unpaid, plus four percent (4%) per annum beginning on August 10, 2003 and ending
when the  Security  Deposit  plus  accrued  interest  has  been  paid in full to
Successor in Interest to MTC and failure to pay the Security Deposit,  including
any accrued interest,  by October 31, 2004 shall be a default. The interest will
be added to the amount that IPRC owes Successor in Interest to MTC.

     2.05 Payments  made by IPRC to  Successor in Interest to MTC shall be first
credited to repayment of the Security  Deposit without accrued interest and then
to payment of accrued  interest.  IPRC shall pay  Successor  in  Interest to MTC
accrued interest in successive fifty thousand United States dollar (U.S.$50,OOO)
payments  every thirty (30) days  beginning  upon the  repayment of the Security
Deposit and continuing  until all accrued  interest due Successor in Interest to
MTC has been paid.  Failure to make accrued interest payments on time shall be a
default.

     2.06 All amounts  specified in this  Agreement are in U.S.  Dollars and are
net of any value  added  taxes  (VAT),  and all  payments  provided  for in this
Agreement  shall be paid in United States Dollars and be remitted  preferably by
wire transfer,  or by check or draft, to the following  banking  address,  or to
such other new banking  address  provided by  Successor  in Interest to MTC upon
ninety (90) days prior written notice thereof to IPRC. Payments by wire shall be
to:

          For the account of: Successor in Interest to MTC

Or if by check or draft to:

          Successor in Interest to MTC

     All payments due from IPRC shall be equal to one hundred  percent (100%) of
the invoice amount or the amount specified in this Agreement without  deductions
for any taxes, assessments or charges levied, assessed or imposed (other than by
the  Government of the U.S.A.) which IPRC or Successor in Interest to MTC or any
other party shall be required to payer withhold in respect to or calculated with
reference  to such  payment due  Successor  in Interest to MTC.  Any such taxes,
assessments,  and/or charges shall be paid by IPRC, on behalf of and in the name
of Successor in Interest to MTC,  and  receipts for such taxes,  assessments  or
charges shall be forwarded to Successor in Interest to MTC.

                       ARTICLE III - ADDITIONAL COVENANTS


<PAGE>


     3.01 IPRC  represents  and warrants  that it has not paid any  dividends or
other capital distributions or made any other distribution or payment on account
of or in redemption, retirement, or purchase of any capital stock (collectively,
"Distributions")  to any of its shareholders  during the time period from August
10, 2002 to the Effective Date.

     3.02 Until the Security Deposit, including any accrued interest, is paid to
Successor  in Interest to MTC in full,  without  Successor  in Interest to MTC's
express written consent:

          (a)  IPRC  agrees  that no  Distributions  shall be made to any of its
shareholders,  however an already agreed payment of up to three hundred thousand
United  States  Dollars  (U.S.$300,000.00)  total  may be made to  IPRC's  three
largest shareholders; and

          (b)  IPRC  agrees  that it  shall  pay no  other  creditor  a  greater
percentage of its  indebtedness  to such creditor than it shall pay to Successor
in Interest to MTC, however IPRC may pay its creditors its actual costs that are
reasonable for office rent, office supplies, office equipment, utilities, taxes,
wages and salaries for employees  other than officers or IPRC  shareholders  and
travel and  entertainment  expense  associated  with marketing MST Units up to a
maximum of fifty  thousand  United States  Dollars  (U.S.$50,000.00)  per month,
which  maximum shall be increased by up to an  additional  twenty-five  thousand
United States Dollars  (U.S.$25,000.00)  per month if needed to support expanded
marketing efforts for MST Units.

     3.03 Beginning  with the  Financial  Trigger  Date,  IPRC shall  deliver to
Successor  in Interest to MTC as soon as  available,  but in any event within 30
days after the end of each calendar  quarter,  a company  prepared  consolidated
balance  sheet and income  statement  covering  IPRC's  consolidated  operations
during such  period,  in a form  acceptable  to Successor in Interest to MTC and
certified by a responsible officer of IPRC.

                      ARTICLE VI - ADDITIONAL REQUIREMENTS

     4.01 The  obligation  of Successor in Interest to MTC to forbear its rights
to receive  the  Security  Deposit  from the Prior  Agreement  is subject to the
condition  precedent that  Successor in Interest to MTC shall have received,  in
form and substance satisfactory to it, the following:

          (a)  this Agreement;

          (b)  an officer's  certificate  of IPRC with respect to incumbency and
resolutions authorizing the execution and delivery of this Agreement;

          (c)  annual  consolidated  balance sheet and income statement covering
IPRC's consolidated  operations during 2002 and 2003 (unaudited ones acceptable)


<PAGE>


as soon as practical after the Financial Trigger Date; and

          (d)  such other  documents,  and completion of such other matters,  as
Successor in Interest to MTC may reasonably deem necessary or appropriate.

     4.02 Should IPRC have an opportunity to sell,  lease or otherwise  transfer
the Torrance MST Equipment  ("Collateral") to a third party for fair value, IPRC
shall promptly notify  Successor in Interest to MTC and Successor in Interest to
MTC, at its sole discretion  under terms  acceptable to Successor in Interest to
MTC, may provide IPRC with a written waiver of its security interest.

     4.03 Successor in Interest to MTC  (through  any of its or its  affiliates'
officers,  employees,  or agents) shall have the right,  upon  reasonable  prior
notice,  from time to time during IPRC's usual  business  hours but no more than
once a year  (unless  IPRC is in  default of any of its  obligations  under this
Agreement),  to inspect  IPRC's  Books and to make copies  thereof and to check,
test, and appraise the Collateral in order to verify IPRC's financial  condition
or the amount, condition of, or any other matter relating to, the Collateral.

                   ARTICLE V - REPRESENTATIONS AND WARRANTIES

     5.01 IPRC represents and warrants as follows:

          (a)  IPRC has good title to the  Collateral,  free and clear of liens,
except  for  liens to  Successor  in  Interest  to MTC and its  affiliates.  All
inventory is in all material respects of good and marketable quality,  free from
all material defects, except for inventory for which adequate reserves have been
made.

          (b)  There are no actions or proceedings pending by or against IPRC or
any of its  affiliates  before  any  court or  administrative  agency in which a
likely adverse  decision could reasonably be expected to have a material adverse
effect on IPRC's interest or Successor in Interest to MTC's security interest in
the Collateral.

          (c)  All consolidated  financial statements related to IPRC and any of
its affiliates that are delivered by IPRC to Successor in Interest to MTC fairly
present in all material respects IPRC's  consolidated  financial condition as of
the date thereof and IPRC's  consolidated  results of operations  for the period
then  ended.  Since  the date of the most  recent of such  financial  statements
submitted to Successor in Interest to MTC, no event or circumstance has occurred
or  exists,  which  individually  or in the  aggregate  has  resulted  or  could
reasonably be expected to result in a material adverse effect.

          (d)  IPRC is. in  default  of its  obligation  to repay  the  Security
Deposit under the Prior Agreement.

          (e)  Successor  in  Interest to MTC , through  its  predecessor,  MTC,
holds a valid, perfected first priority lien against the Collateral,  which lien
will continue in full force and effect until  repayment of the Security  Deposit
is made in full.


<PAGE>


          (f)  Successor in Interest to MTC, through its  predecessor,  MTC, has
the present  right to exercise  all of the  remedies  available to MTC under the
Prior Agreement.

                             ARTICLE VI - ASSIGNMENT

     6.01 This  Agreement  shall be binding upon and inure to the benefit of the
parties  hereto  and the  successors  to  substantially  the  entire  assets and
business of the respective parties hereto. This Agreement shall be assignable by
Successor in Interest to MTC to any of its affiliates but shall not otherwise be
assignable by either party without the prior written consent of the other party.
Any and all  assignments of this Agreement or of any interests  therein not made
in accordance with this Paragraph shall be void.

                              ARTICLE VII- DEFAULT

     7.01 If IPRC shall be in default of any obligation hereunder,  Successor in
Interest  to MTC  may  give  written  notice  to  IPRC  specifying  the  claimed
particulars  of such default and in the event IPRC shall not have  remedied such
default within sixty (60) days after the date of such notice,

          (a)  The entire unpaid  principal sum of the Security Deposit plus any
and all interest  accrued  thereon shall, at the option of Successor in Interest
to MTC, become due and payable immediately without presentment,  demand,  notice
of payment,  protest,  notice of protest,  or other notice of  dishonor,  all of
which are expressly waived by IPRC.

          (b)  Successor  in  Interest  to MTC shall  have with  respect  to the
Collateral  all of the rights and remedies of a secured  party under the Uniform
Commercial Code or any other applicable law and all rights provided herein or in
any other applicable security, loan or other agreement,  all of which rights and
remedies shall, to the full extent permitted by law, be cumulative.

          (c)  Successor  in Interest to MTC may require  IPRC at its expense to
assemble  the  Collateral  and make it  available  to Successor in Interest at a
place to be  designated  by  Successor  in Interest  to MTC which is  reasonably
convenient to Successor in Interest to MTC and IPRC.

          (d)  Successor in Interest may sell the Collateral or any part thereof
at public or private  sale,  at any of Successor in Interest to MTC's offices or
elsewhere,  for cash, on credit or for future  delivery,  and at such prices and
upon such other terms as  Successor  in  Interest  to MTC may deem  commercially
reasonable.

          (e)  Any  notice  of sale,  disposition  or other  intended  action by
Successor in Interest to MTC, sent to IPRC at the address  specified  below,  or


<PAGE>


such  other  address of IPRC as may from time to time be shown on  Successor  in
Interest to MTC's  records,  at least five (5) days prior to such action,  shall
constitute reasonable notice to IPRC.

          (f)  The rights and remedies  provided to Successor in Interest herein
are not exclusive and are in addition to any other rights and remedies Successor
in Interest  already has under the Prior Agreement and may now or hereafter have
at law or in equity, and each and every such right or remedy shall be cumulative
and concurrent,  and in addition to every other such right or remedy, and may be
pursued singly,  concurrently,  successively or together, at the sole discretion
of Successor  in Interest to MTC, and shall not be exhausted by anyone  exercise
thereof but may be exercised  as often as occasion  therefore  shall occur.  The
failure to exercise or delay in exercising any such right or remedy shall not be
construed as a waiver or release thereof.

                          ARTICLE VIII - MISCELLANEOUS

     8.01 The  validity  and  interpretation  of this  Agreement  and the  legal
relations of the parties to it shall be governed by the laws of the Commonwealth
of Virginia, U.S.A. without recourse to its conflicts of law rules.

     8.02 None of the provisions of this  Agreement  shall be construed so as to
require the  commission  of any act contrary to law,  and wherever  there is any
conflict between any provision of this Agreement and any material  statute,  law
or ordinance,  the latter shall prevail; but in such event the provision of this
Agreement  affected shall be curtailed and limited only to the extent  necessary
to bring it within the legal requirements.

     8.03 IPRC  shall  not  cause or  permit  the  release  of any  advertising,
publicity, news release or other public announcement referring to this Agreement
or having or containing any reference to Successor in Interest or its affiliates
or in which the name of Successor in Interest Research and Engineering  Company,
Successor  in  Interest to MTC,  Successor  in  Interest  to MTC,  Successor  in
Interest to MTC,  Successor in Interest to MTC or Successor in Interest  appears
until  written  approval has been  obtained  from  Successor in Interest to MTC,
however IPRC may re-release or refer to previously  published  information  that
refers to Successor in Interest or its affiliates.

     8.04 The  headings in this  Agreement  are for  informational  purposes and
should not be construed as altering the terms of the Agreement.

                             ARTICLE IX - ADDRESSES

     9.01 The addresses of the parties  hereto are as follows,  but either party
may change its address for the purpose of this Agreement by notice in writing to
the other party:

                          Successor in Interest to MTC:


<PAGE>


                  Imperial Petroleum Recovery Corporation 1970\
                  South Starpoint Drive
                  Houston TX 77032
                  Telephone: 281 821 1110
                  Attn: Alan Springer

In the event notices,  statements,  payments  received under this Agreement by a
party  hereto are sent by  certified or  registered  mail to the party  entitled
thereto at the address  provided for in this Agreement,  they shall be deemed to
have been given or made as of the date so mailed, and if sent by wire then as of
the date transferred.


<PAGE>


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their respective  corporate names by their respective officers thereunto duly
authorized.

IMPERIAL PETROLEUM                       SUCCESSOR IN INTEREST TO MTC
RECOVERY CORPORATION
By                                       By
Name:                                    Name:
Title                                    Title
Date:                                    Date:



<PAGE>


                                   APPENDIX I

Payment Calculation Examples:

Example 1:

A.   Assume Financial Trigger Date is May 1, 2004
B.   Assume IPRC sells one (1) MST Unit in the May 1 transaction  C. IPRC should
     pay  Successor  in Interest at least  $60,000 on each July 30,  October 30,
     January 30, and April 30 thereafter  until the Security Deposit and accrued
     interest have been paid in full.

Example 2:

D.   Assume Financial Trigger Date is May 1, 2004
E.   Assume IPRC sells two (2) MST Units in the May 1 transaction F. IPRC should
     pay  Successor in Interest at least  $120,000 on each July 30,  October 30,
     January 30, and April 30 thereafter  until the Security Deposit and accrued
     interest have been paid in full.

Example 3:

G.   Assume Financial Trigger Date is May 1, 2004
H.   Assume IPRC sells three (3) MST Units in the May 1 transaction
I.   IPRC should pay Successor in Interest to MTC at least $180,000 on each July
     30,  October 30,  January 30, and April 30  thereafter  until the  Security
     Deposit has been paid in full.  Under the terms of the  Agreement,  if IPRC
     makes the  specified  payments on time,  Successor  in Interest to MTC will
     forgive the accrued interest.

Example 3a:

J.   Assume Financial Trigger Date is May 1, 2004
K.   Assume IPRC sells three (3) MST Units in the May 1 transaction
L.   IPRC should pay Successor in Interest to MTC at least $180,000 on each July
     30,  October 30,  January 30, and April 30  thereafter  until the  Security
     Deposit has been paid in full,  and if IPRC should fail to make one or more
     payments  on time,  then also until the accrued  interest  has been paid in
     full.