CERTIFICATE OF THE DESIGNATION, PREFERENCES, RIGHTS AND LIMITATIONS OF SERIES D CONVERTIBLE NON-REDEEMABLE PREFERRED STOCK OF BLUEGATE CORPORATION

1.  

2.  

(a)  

Each holder of shares of Series D Convertible Preferred Stock may, at his option and at any time and from time to time, convert any or all such shares, into fully paid and non-assessable shares of the Company’s Common Stock at a conversion ratio of 25,000 shares of Common Stock for each share of Series D Convertible Preferred Stock.  Fractional Conversions are permitted.

(b)  

To exercise his conversion privilege, the holder of any shares of Series D Convertible Preferred Stock shall surrender to the Company during regular business hours at the principal executive offices of the Company or the offices of the transfer agent for the Series D Convertible Preferred Stock or at such other place as may be designated by the Company, the certificate or certificates for the shares to be converted, duly endorsed for transfer to the Company (if required by it), accompanied by written notice stating that the holder irrevocably elects to convert such shares.  Conversion shall be deemed to have been effected on the date when such delivery is made, and such date is referred to herein as the “Conversion Date.”  Within five (5) business days after the date on w hich such delivery is made, the Company shall issue and send (with receipt to be acknowledged) to the holder thereof for the holder’s designee, at the address designated by such holder, a certificate or certificates for the number of full and fractional shares of Common Stock to which the holder is entitled as a result of such conversion.  The holder shall be deemed to have become a stockholder of record of the number of shares of Common Stock into which the shares of Series D Convertible Preferred Stock have been converted on the applicable Conversion Date unless the transfer books of the Company are closed on that date, in which event he shall be deemed to have become a stockholder or record of such shares on the next succeeding date on which the transfer books are open.  Upon conversion of only a portion of the number of share of Series D Convertible Preferred Stock represented by a certificate or certificates surrendered for conversion, the Company shall within three (3) busines s days after the date on which such delivery is made, issue and send (with receipt to be acknowledged) to the holder thereof or the holder’s designee, at the address designated by such holder, a new certificate covering the number of shares of Series D Convertible Preferred Stock representing the unconverted portion of the certificate or certificates so surrendered.

(c)  

The Company shall at all times reserve for issuance and maintain available, out of its authorized but unissued Common Stock, solely for the purpose of effecting the conversion of the Series D Convertible Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all Series D Convertible Preferred Stock from time to time outstanding.  The Company shall from time to time (subject to obtaining necessary director and stockholder action), in accordance with the laws of the State of Nevada, increase the authorized number of shares of its Common Stock if at any time the authorized number of shares of its Common Stock remaining unissued shall not be sufficient to permit the conversion of all of the shares of Series D Convertible Preferred Stock at the time outstandin g.

(d)  

If any shares of Common Stock to be reserved for the purpose of conversion of shares of Series D Convertible Preferred Stock require listing with, or approval of, any governmental authority, stock exchange or other regulatory body under any federal or state law or regulation or otherwise, before such shares may be validly issued or delivered upon conversion, the Company will in good faith and as expeditiously as possible meet such listing or approval, as the case may be.

(e)  

All shares of Common Stock which may be issued upon conversion of the shares of Series D Convertible Preferred Stock will upon issuance by the Company be validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issuance therefore.

(f)  

In case any shares of Series D Convertible Preferred Stock shall be converted pursuant hereto, or purchased or otherwise acquired by the Company, the shares so converted, purchased or acquired shall be restored to the status of authorized but unissued shares of preferred stock, without designation as to class or series, and may thereafter be reissued, but not as shares of Series D Convertible Preferred Stock.

(g)  

The conversion ratio of the Series D Convertible Preferred Stock into Common Stock of the Company shall be subject to adjustment from time to time as follows:

(i)  

Stock Splits, Dividends and Combinations.  In the event that the Company shall at any time subdivide the outstanding shares of Common Stock, or shall pay or make a dividend or distribution on any class or capital stock of the Company in Common Stock, the conversion ratio in effect immediately prior to such subdivision or the issuance of such dividend shall be proportionately decreased, and in case the Company shall at any time combine the outstanding shares of Common Stock, the conversion ratio in effect immediately prior to such combination shall be proportionately increased, effective at the close of business on the date of such subdivision, dividend or combination, as the case may be.

(ii)  

Non-Cash Dividends, Stock Purchase Rights, Capital Reorganization and Dissolutions.  In the event:

(a)  

           that the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend, or any other distribution payable otherwise than in case; or

(b)  

           that the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to subscribe for  or purchase any shares of stock of any class or other securities, or to receive any other rights; or

(c)  

of any capital reorganization of the Company, reclassification of the capital stock of the Company (other than a subdivision or combination of its outstanding shares of Common Stock), consolidation or merger of the Company with or into another corporation, share exchange for all outstanding shares of Common Stock under a plan of exchange to which the Company is a party, or conveyance of all or substantially all of the assets of the Company to another corporation; or

(d)  

           of the voluntary or involuntary dissolution, liquidation or winding up of the Company;

       3.

Voting of Series D Convertible Preferred Stock.  The shares of Series D Convertible Preferred Stock shall be entitled to vote, together with the shares of the Company’s Common Stock, on all matters presented at any annual or special meeting of stockholders of the Company, or may act by written consent in the same manner as the holders of the Company’s Common Stock; upon the following basis: each holder of Series D Convertible Preferred Stock shall be entitled to cast such number of votes for each share of Series D Convertible Preferred Stock held by such holder on the record date fixed for such meeting, or on the effective date of such written consent, as shall be equal to one hundred-fifty (150) times the number of shares of the Company’s Common Stock into which each of such holder’s shares of Series D Convertible Preferred Stock is convertible immediately after the close of business on the record date fixed for such meeting or the effective date of such written consent.  The Series D Convertible Preferred Stock and any other stock having voting rights shall vote together as one class, except as provided by law.

       4.

 

(a)

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of shares of Series D Convertible Preferred Stock then outstanding shall be entitled to receive out of assets of the Company available for distribution to stockholders, before any distribution of assets is made to holders of any other class of capital stock of the Company, an amount equal to $8,725.00 per share (“Liquidation Amount”).

(b)  

A consolidation or merger of the Company (in the event that the Company is not the surviving entity) or sale of all or substantially all of the Company’s assets shall be regarded as a liquidation, dissolution or winding up of the affairs of the Company within the meaning herein.  In the event of such liquidation as contemplated herein, the holders of Series D Convertible Preferred Stock shall be entitled to receive an amount equal to the Liquidation Amount.

(c)  

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company which involves the distribution of assets other than cash, the Company shall promptly engage competent independent appraisers to determine the value of the assets to be distributed to the holders of shares of this Series D Convertible Preferred Stock, other preferred stock, and the holders of shares of Common Stock.  The Company shall, upon receipt of such appraiser’s valuation, give prompt written notice to each holder of shares of Series D Convertible Preferred Stock of the appraiser’s valuation.

       5.

No Redemption by the Company.  Series D Convertible Preferred Stock is not redeemable by the Company.

THE STATE OF TEXAS

§

COUNTY OF HARRIS

§