Exhibit 10.12

EXECUTION VERSION

PROMISSORY NOTE

     
Principal Amount: $2,000,000
  Scottsdale, Arizona   
Interest Rate Per Annum: 4.46%
  January 25, 2008   

FOR VALUE RECEIVED, the undersigned QUEPASA CORPORATION, a Nevada corporation
(the “Maker”), hereby promises to pay to the order of RICHARD L. SCOTT
INVESTMENTS, LLC, a      limited liability company (the “Payee”), the unpaid
principal amount of all amounts loaned by Payee to Maker under this Subordinated
Promissory Note (the “Note”) together with all accrued and outstanding interest
in respect of such principal amount and all other amounts payable hereunder, in
accordance with the terms of this Note.

1.   Extension of Loan. On the date hereof, Payee is extending a loan of
$2,000,000 to Maker. By its execution of this Note, Maker acknowledges receipt
of such funds.

2.   Repayment of Principal.

  (a)   As between Maker and Payee. shall repay the principal amount of this
Note, together with all accrued and outstanding interest in respect of such
principal amount and all other amounts payable hereunder upon the first to occur
of: (i) March 21, 2016, (ii) the exercise by Holder (as defined therein) of all
or a portion of that certain Common Stock Purchase Warrant (Series 2) for
500,000 shares of Common Stock, issued as of March 21, 2006, as amended, and/or
that certain Common Stock Purchase Warrant (Series 3) for 500,000 shares of
Common Stock, issued as of March 21, 2006, as amended, but only in the principal
amount (which together with all accrued interest) is equal to the exercise price
payable by the Payee to Maker with respect to the exercise of such Warrants,
(iii) any liquidation, dissolution, winding up, or liquidating dividend of
Maker, (iv) the commencement of any Insolvency or Liquidation Proceeding (as
defined below), (v) upon the acceleration of the maturity hereof by Payee after
the occurrence of an Event of Default hereunder as provided in Section 11, or
(vi) upon the occurrence of (x) any consolidation or merger of Maker with or
into any other corporation or other entity or person, or any other corporate
reorganization, other than any such consolidation, merger or reorganization in
which the stockholders of the Maker immediately prior to such consolidation,
merger or reorganization, continue to hold at least a majority of the voting
power of the surviving entity in substantially the same proportions (or, if the
surviving entity is a wholly owned subsidiary, its parent) immediately after
such consolidation, merger or reorganization; (y) any transaction or series of
related transactions to which the Maker is a party in which in excess of fifty
percent (50%) of the Maker’s voting power is transferred; or (z) a sale, lease,
exclusive license or other disposition of all or substantially all of the assets
of the Maker; except in the case of this clause (vi) for a transaction with
respect to which the weighted average (based on daily trading volume of the
principal market) closing price of Maker’s common stock for the 30 days
following the announcement of such transaction exceeded $2.75 per share
(adjusted for stock splits, dividends and similar transactions subsequent to the
date hereof). This Note may be prepaid, in whole or in part, at any time, at the
option of the Maker.

 

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  (b)   As among holders of Pari Passu Debt. Subject to Section 12, in the event
that the Payee receives any payment with respect to this Note (other than a
payment or deemed payment pursuant to Section 2(a)(ii)) that is greater than its
pro rata share (based on outstanding principal amount) of all payments
concurrently made to the holders of Pari Passu Debt, then the amount of such
payment in excess of the pro rata share (the “Excess Payment”) shall be held by
Payee, in trust for the benefit of, and shall be paid forthwith over and
delivered, upon written request, to, the holders of Pari Passu Debt as their
interests may appear or their Representative under the agreements (if any)
pursuant to which Pari Passu Debt may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Pari Passu Debt remaining unpaid. Payee shall be subrogated to the
rights of holders of Pari Passu Debt to the extent that distributions otherwise
payable to Payee have been applied to the payment of Pari Passu Debt.

3.   Payment of Interest. Interest shall accrue on the unpaid principal amount
outstanding hereunder from the date of this Promissory Note until such principal
amount is paid in full at an interest rate equal at all times to the rate set
forth above, compounded annually. Maker shall only be required to pay interest
on the outstanding principal amount in connection with the payment (or
prepayment) or maturity of principal hereunder.

4.   No Right of Set-Off. Maker shall not have, and hereby expressly waives, the
right to withhold and set-off against any amount due hereunder any amounts due
Maker from Payee.

5.   Payment Mechanics. Principal, interest and other amounts due hereunder are
payable in lawful money of the United States of America in same day or
immediately available funds to the account of Payee as specified in writing, or
at such other place or places as the Payee may, from time to time, designate in
writing. All computations of interest under this Note shall be made on the basis
of a year of 360 days for the actual number of days (including the first but
excluding the last day) occurring in the period for which such interest is
payable. Whenever any payment to be made hereunder shall be stated to be due on
a day that is not a business day, such payment shall be due instead on the next
succeeding business day, and such extension of time shall in such case be
included in the computation of such payment of interest and not in the
computation of the succeeding payment of interest.

6.   Certain Covenants

  (a)   Payment on Pari Passu Debt. Maker shall not make any payments on any
Pari Passu Debt (other than the acceptance of such Pari Passu Debt in payment of
the exercise price of any warrant for Maker’s common stock in a manner similar
to Section 2(a)(ii) hereof) unless and until Maker pays a ratable payment on
this Note (for example, if Maker pays, in cash, 50% of the outstanding principal
amount of any Pari Passu Debt, then Maker must simultaneously pay, in cash, 50%
of the principal amount of this Note).

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  (b)   Incurrence of Indebtedness. Without the prior written consent of the
holders of a majority of the outstanding principal amount of this Note and the
Pari Passu Debt voting as a single class (the “Requisite Holders”), the Company
and its subsidiaries shall not incur, create, assume, or in any manner become or
be liable, as principal obligor, guarantor, or otherwise, with respect to any
indebtedness for borrowed money (whether secured or unsecured, and including
capital leases), except the following:

  (i)   Purchase Money Debt and Capital Lease Obligations. Purchase money debt
and capital lease obligations used to finance the acquisition of equipment in
the ordinary course of business, not exceeding the purchase price of the
equipment financed or subject to the capital lease, as the case may be, and not
imposing a lien or security interest on any assets other than the equipment so
financed.

  (ii)   Other Indebtedness. Other Indebtedness for borrowed money not to exceed
$3 million.

  (iii)   Pari Passu Debt. The Pari Passu Debt incurred in connection with and
as a condition to the incurrence of this Note.

  (iv)   Endorsements. Endorsements of negotiable or similar instruments for
collection or deposit in the ordinary course of business.

  (c)   Right to Participate in Future Lendings. To the extent that Maker incurs
additional indebtedness due to any holder of Pari Passu Debt or any affiliate of
such holder, Payee shall have the right (but not the obligation) to provide its
pro rata share (based on the outstanding principal amount of this Note and such
Pari Passu Debt) of such additional indebtedness.

7.   Expenses. Maker shall pay on demand all reasonable costs and expenses
incurred by or on behalf of Payee in connection with Payee’s exercise of any or
all of its rights and remedies under this Note, including, without limitation,
in each case reasonable attorneys’ fees.

8.   Assignment. Subject to compliance with the Securities Act of 1933, as
amended, and any applicable state or other federal securities laws, Payee shall
have the right to assign its rights hereunder or any interest herein without the
prior written consent of Maker. Upon delivery of written notice to Maker of any
such assignment, any such assignee shall, except as otherwise specified in the
relevant assignment document, succeed to all of the rights of Payee hereunder.
Maker may not assign its obligations hereunder without the prior written consent
of Payee. All the covenants, stipulations, promises and agreements made by or
contained in this Note on behalf of the Maker shall bind its successors, whether
so expressed or not.

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9.   Governing Law; Waiver of Jury Trial. THIS NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. PAYEE AND MAKER
HEREBY KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE TRIAL BY JURY
IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR
TORT OR OTHERWISE, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO
THIS NOTE OR THE NOTE PURCHASE AGREEMENT.

10.   No Implied Waiver; Waivers. No failure on the part of Payee to exercise,
and no delay in exercising, any right under this Note shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right. This Note
may not be changed orally, but only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, modification or discharge
is sought.

11.   Default; Default Interest. Time is of the essence of this Note. If any
Event of Default shall occur hereunder, which Event of Default is not cured
following the giving of any applicable notice and within any applicable cure
period set forth herein, and in such event, the entire outstanding principal
balance of the indebtedness evidenced hereby, together with any other sums
advanced hereunder, together with all unpaid interest accrued thereon, shall, at
the option of Payee and without notice to Maker, at once become due and payable
and may be collected forthwith, regardless of the stipulated date of maturity.
Further, upon the occurrence of any Event of Default as set forth herein, at the
option of Payee and upon written notice to Maker, all accrued and unpaid
interest, if any, shall be added to the outstanding principal balance hereof,
and the entire outstanding principal balance, as so adjusted, shall bear
interest thereafter until paid at an annual rate (the “Default Rate”) equal to
the lesser of (i) the rate that is five percentage points (5.0%) in excess of
the above-specified interest rate, or (ii) the maximum rate of interest allowed
to be charged under applicable law (the “Maximum Rate”), regardless of whether
or not there has been an acceleration of the payment of principal as set forth
herein. All such interest shall be paid at the time of and as a condition
precedent to the curing of any such Event of Default.

12.   Subordination . Maker and Payee agree that the indebtedness evidenced by
the Note is subordinated in right of payment, to the extent and in the manner
provided herein, to the prior payment in full of all Senior Obligations (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Obligations.

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  (a)   Upon any payment or distribution of assets of Maker of any kind or
character, whether in cash, property or securities, to creditors in any
Insolvency or Liquidation Proceeding with respect to Maker, all amounts due or
to become due under or with respect to all Senior Obligations shall first be
paid indefeasibly in full in cash before any payment is made on account of this
Note. Upon any such Insolvency or Liquidation Proceeding, any payment or
distribution of assets of Maker of any kind or character, whether in cash,
property or securities, to which Payee would be entitled shall be paid by Maker
or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
person making such payment or distribution, or by Payee if received by it,
directly to the holders of Senior Obligations (pro rata to such holders on the
basis of the amounts of Senior Obligations held by such holders) or their
Representative, as their interests may appear, for application to the payment of
the Senior Obligations remaining unpaid until all such Senior Obligations have
been paid indefeasibly in full in cash, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of Senior
Obligations.

  (b)   (i) Upon the receipt of a notice of default and during the continuation
of any default in the payment of principal of, interest or premium, if any, on
any Senior Obligations, or in the event that any event of default (other than a
payment default) with respect to any Senior Obligations shall have occurred and
Maker has received notice thereof and such default shall be continuing and shall
have resulted in such Senior Obligation becoming or being declared due and
payable prior to the date on which it would otherwise have become due and
payable, or (ii) upon the receipt of a notice of default and during the
continuation of any event of default, other than an event of default as
described in clause (i) above, with respect to any Senior Obligations that
permits the holders of such Senior Obligations (or their Representative or
Representatives) to declare such Senior Obligations due and payable prior to the
date on which it would otherwise have become due and payable, then no cash
payment or other distribution or transfer of assets shall be made by or on
behalf of Maker on account of this Note (except that the issuance of common
stock to Payee pursuant to the Series 1 and Series 2 warrant as contemplated in
Section 2(a)(ii) in return for the full or partial surrender by Payee of this
Note shall be permitted), unless and until such default shall have been cured or
waived in writing in accordance with the instruments governing such Senior
Obligations or such acceleration shall have been rescinded or annulled.

  (c)   In the event that the Payee receives any payment with respect to this
Note at a time when such payment is prohibited by the provisions hereof, such
payment shall be held by Payee, in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to, the holders of Senior
Obligations as their interests may appear or their Representative under the
agreements (if any) pursuant to which Senior Obligations may have been issued,
as their respective interests may appear, for application to the payment of all
Obligations with respect to Senior Obligations remaining unpaid to the extent
necessary to pay such Senior Obligations in full in accordance with their terms,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Obligations.

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  (d)   After all Senior Obligations are paid in full and until this Note is
paid in full, Payee shall be subrogated (equally and ratably with all other Pari
Passu Debt) to the rights of holders of Senior Obligations to receive
distributions applicable to Senior Obligations to the extent that distributions
otherwise payable to Payee have been applied to the payment of Senior
Obligations. A distribution made under this Note to holders of Senior
Obligations that otherwise would have been made to Payee is not, as between
Maker and Payee, a payment by Maker on this Note.

  (e)   The “Subordination” section of this Note defines the relative rights of
Payee and holders of Senior Obligations. Nothing in this Note shall impair, as
between Maker and Payee, the obligations of Maker, which are absolute and
unconditional, to pay principal of and interest on this Note in accordance with
its terms or affect the relative rights of Payee and creditors of Maker other
than their rights in relation to holders of Senior Obligations.

  (f)   No right of any holder of Senior Obligations to enforce the
subordination of the indebtedness evidenced by this Note shall be impaired by
any act or failure to act by Maker or Payee or by the failure of Maker or Payee
to comply with this Note.

  (g)   Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Obligations, or any of them, may, at any time and from
time to time, without the consent of or notice to Payee, without incurring any
liabilities to Payee and without impairing or releasing the subordination and
other benefits provided in this Note or the obligations of Payee to the holders
of the Senior Obligations, even if any right of reimbursement or subrogation or
other right or remedy of Payee is affected, impaired or extinguished thereby,
take any action with respect to the Senior Obligations, including, without
limitation, any one or more of the following:

  (i)   change the manner, place or terms of payment or change or extend the
time of payment of, or renew, exchange, amend, increase or alter, the terms of
any Senior Obligations, any security therefor or guaranty thereof or any
liability of any obligor thereon (including any guarantor) to such holder, or
any liability incurred directly or indirectly in respect thereof or otherwise
amend, renew, exchange, extend, modify, increase or supplement in any manner any
Senior Obligations or any instrument evidencing or guaranteeing or securing the
same or any agreement under which Senior Obligations are outstanding;

  (ii)   sell, exchange, release, surrender, realize upon, enforce or otherwise
deal with in any manner and in any order any property pledged, mortgaged or
otherwise securing Senior Obligations or any liability of any obligor thereon,
to such holder, or any liability incurred directly or indirectly in respect
thereof;

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  (iii)   settle or compromise any Senior Obligations or any other liability of
any obligor of the Senior Obligations to such holder or any security therefor or
any liability incurred directly or indirectly in respect thereof and apply any
sums by whomsoever paid and however realized to any liability (including,
without limitation, Senior Obligations) in any manner or order; and

  (iv)   fail to take or to record or to otherwise perfect, for any reason or
for no reason, any lien or security interest securing Senior Obligations by
whomsoever granted, exercise or delay in or refrain from exercising any right or
remedy against any obligor or any guarantor or any other person, elect any
remedy and otherwise deal freely with any obligor and any security for the
Senior Obligations or any liability of any obligor to such holder or any
liability incurred directly or indirectly in respect thereof.

  (h)   Whenever a distribution is to be made or a notice given to holders of
Senior Obligations, the distribution may be made and the notice given to their
Representative. Upon any payment or distribution of assets of Maker referred to
in the “Subordination” section of this Note, Payee shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other person making any distribution to Payee for the purpose of ascertaining
the persons entitled to participate in such distribution, the holders of the
Senior Obligations and other indebtedness of Maker, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to the “Subordination” section of this Note.

13.   Definitions.

  (a)   "Event of Default” means the occurrence of any of the following:

  (i)   Maker’s failure to pay principal or interest when due under this Note.

  (ii)   Any representation or warranty by Maker in the Note Purchase Agreement
of even date herewith was incorrect in any material respect as of the date
thereof.

  (iii)   Fifteen (15) days following Payee’s written notice to Maker of Maker’s
failure to comply with, observe, or perform any covenant contained in this Note;
provided, however, as to any such breach that is reasonably susceptible to being
cured, the occurrence of such breach shall not constitute an Event of Default
hereunder if such breach is fully cured within such fifteen (15) day period.

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  (iv)   Default in the payment of principal of, interest or premium, if any, on
any Senior Obligation or Pari Passu Debt exceeding Five Hundred Thousand and
No/100 Dollars ($500,000.00) (a “Material Debt”) in the aggregate or in the
event that any event of default (other than a payment default) with respect to
any Material Debt shall have occurred and Maker has received notice thereof and
such default shall have resulted in such Material Debt becoming or being
declared due and payable prior to the date on which it would otherwise have
become due and payable.

  (b)   "Insolvency or Liquidation Proceeding” means (i) any voluntary or
involuntary insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding, relative to
Maker or to the creditors of Maker, as such, or to the assets of Maker, or (ii)
any liquidation, dissolution, reorganization or winding up of Maker, whether
voluntary or involuntary and involving insolvency or bankruptcy, or (iii) any
assignment for the benefit of creditors or any other marshaling of assets and
liabilities of Maker.

  (c)   "Obligations” means any principal, interest, penalties, expenses, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Senior Obligations or Pari Passu Debt, as the
case may be.

  (d)   "Pari Passu Debt” means any indebtedness of Maker which by its terms is
pari passu in right of payment to this Note and which contains provision
substantially similar to Section 2(b) hereof. Maker agrees that the
approximately $2 million of additional new indebtedness of Maker incurred in
connection with and as a condition to this Note includes terms designating such
indebtedness as Pari Passu Debt.

  (e)   "Representative” means the trustee, agent or representative for any
Senior Obligations or Pari Passu Debt as the case may be.

  (f)   "Senior Obligations” shall mean all obligations (whether now outstanding
or hereafter incurred) for the payment of indebtedness for borrowed money which
Maker is responsible or liable as obligor, guarantor or otherwise, except those
which by their express terms are pari passu in right of payment with this Note.

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IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as of the
date first set forth above.

QUEPASA CORPORATION

By: /s/ John C. Abbott
Name: John C. Abbott
Title: Chief Executive Officer and
Chairman of the Board of Directors

ACCEPTED:

RICHARD L. SCOTT INVESTMENTS, LLC

By: /s/ Richard L. Scott
Name: Richard L. Scott
Title: Chief Executive Officer

Signature Page to Quepasa Subordinated Promissory Note

 

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