**SHAREHOLDERS AGREEMENT**  **OF **  **DRAFT II PARTICIPAÇÕES S.A.**

**VBC ENERGIA S.A.**, former Serra da Mesa Energia S.A., a joint-stock corporation with offices in the city of São Paulo, State of São Paulo, at Avenida Engenheiro Luís Carlos Berrini, 1297/1307, 13th floor, suite 132, enrolled with the National Register of Legal Entities of the Ministry of Finance (“CNPJ/MF”) under No. 00.095.147/0001-02, hereinafter simply referred to as “VBC”;

**521 PARTICIPAÇÕES S.A.**, a joint-stock corporation with offices in the city of Rio de Janeiro, State of Rio de Janeiro, at Praia de Botafogo, 501 – 4th floor, enrolled with the National Register of Legal Entities of the Ministry of Finance (“CNPJ/MF”) under No. 01.547.749/0001-16, hereinafter simply referred to as “521”;

**BONAIRE PARTICIPAÇÕES S.A.**, a joint-stock corporation with offices in the city of São Paulo, State of São Paulo, at Avenida Juscelino Kubitscheck, 50, 18th floor – part occupancy, enrolled with the National Register of Legal Entities of the Ministry of Finance (“CNPJ/MF”) under No. 02.117.801/0001-67, hereinafter simply referred to as “BONAIRE”; and they may be individually referred to as PARTY, or collectively PARTIES;

and, as Intervening Consenting Party,

**DRAFT II PARTICIPAÇÕES S.A.**, whose name shall be changed to CPFL Energia S.A., a joint-stock corporation with offices in the city of São Paulo, State of São Paulo, at Rua Iguatemi, 192, suite 121, enrolled with the National Register of Legal Entities of the Ministry of Finance (“CNPJ/MF”) under No. 02.429.144/0001-93, hereinafter simply referred to as “COMPANY”; the PARTIES and COMPANY being represented according to their respective bylaws,

WHEREAS the PARTIES:

 (i) hold the majority of the capital of COMPANY, a holding resulting from the reorganization of investments of VBC, 521, and BONAIRE in the electricity power industry;

 (ii) hold a direct equity in Companhia Paulista de Força e Luz — CPFL (hereinafter referred to as CPFL-D) and in CPFL Geração de Energia S.A. (hereinafter referred to as CPFL-G);

 (iii) are bound to increase the capital of COMPANY upon the transfer of all shares owned in the capital of CPFL-D and CPFL-G; 

(iv) wish to list COMPANY’s shares in Brazilian stock exchanges, according to the rules of the New Market, and abroad; and 

(v) wish to regulate the exercise of the voting right inherent to their shares, the restriction on the circulation, the mutual relations as controlling shareholders, as well as to establish the general principles to exercise of the controlling power and manage COMPANY and the SUBSIDIARIES thereof, 

They have agreed to enter into this Shareholders Agreement, pursuant to, and for the purposes of article 118, including its paragraphs, Law Nr. 6.404, of 12/15/1976, which shall be governed as follows: 

 

 

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**CLAUSE ONE – DEFINITIONS**  

1.1Unless as otherwise clearly required by context, the capitalized terms andexpressions below shall have the meanings set forth in this clause: 

(a) SHARES or BOUND SHARES – the common sharesissued by the COMPANY and owned by the PARTIES (sub-clause 3.1), as well as anyshares added to the equity of each of the PARTIES by virtue of subscription,split or bonus; 

(b) LITIGATION SHARES – such BOUND SHARES thatare object of arrest, seizure or legal attachment; 

(c) AGREEMENT – this Shareholders Agreement, whichis the only voting agreement executed by and between the PARTIES, which arehereby bound not to execute any other agreement of the same nature with thePARTIES or with third parties during the effectiveness hereof; 

(d) AFFILIATE – shall mean, in relation to eachPARTY, the legal entity acting as its parent company, subsidiary, or directlyor indirectly controlled by the same parent company(ies) of the PARTY, 

(e) CONTROL BLOCK – the block of BOUND SHARES,owned by the PARTIES, representing more than 50% of COMPANY’s voting capital,which entitle them to preponderance in company resolutions; 

(f) ASSOCIATED COMPANY – a company in whichCOMPANY holds no less than ten percent (10%) of the voting capital, without,however, controlling it; 

(g) SUBSIDIARY – a company in which COMPANY,directly or through other companies, holds the controlling power,(i) individually, for being the holder of voting rights that entitle it ona permanent basis preponderance in company resolutions and the power to elect themajority of the managers, or (ii) for participating in the control blockgoverned by Shareholders or Quotaholders Agreement; 

(h) BYLAWS – the COMPANY’S bylaws, which – basedon CPFL-D’s current bylaws – shall, in no more than 60 days as of thisdate, be restated to reflect the changes in the Brazilian Corporate Law (“Leidas S.A.’s”) and the provisions hereof, including any amendment approved duringthe effectiveness thereof; 

(i) ANNUAL BUDGET – the annual budget containingan estimate of the operating revenues and expenses, of the costs andinvestments, the cash flow, the amount to be used to pay dividends, theinversions of resources with own capital or that of third parties and otherdata deemed required by COMPANY’s management; 

(j) OFFEROR – the PARTY willing to dispose of theBOUND SHARES to a third party or to any of the other PARTIES or, for thepurposes of Clause 12, that whose control is changed; 

(l) RELATED PARTY(IES) – partner(s),quotaholder(s) or shareholder(s) of the PARTIES, to wit: 

(i) in relation to VBC: Votorantim Energia Ltda.,Bradesplan Participações S.A. and Camargo Corrêa Energia Ltda., and theirrespective AFFILIATES; 

 

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(ii) in relation to 521: PREVI – Caixa de Previdência dos Funcionários do Banco do Brasil, and their AFFILIATES; 

(iii) in relation to BONAIRE: Funcesp – Fundação Cesp, Petros – Fundação Petrobrás de Seguridade Social, Sistel – Fundação Sistel de Seguridade Social, Sabesprev – Fundação Sabesp de Seguridade Social and their respective AFFILIATES; 

(m) 5-YEAR BUSINESS PLAN – COMPANY’s 5-year business plan comprising the strategic planning, which shall contain the investment plans and the projections for a period of five (5) fiscal years of COMPANY and the SUBSIDIARIES thereof, comprising activities, strategies, new investments, and business opportunities, the amounts to be invested or otherwise contributed from resources of its own or third parties, as well as the expected return and profit rates; 

(n) PREVIOUS MEETING – meeting of the PARTIES to be held before any General Meeting or meeting of the Board of Directors of COMPANY, the SUBSIDIARIES or ASSOCIATED COMPANIES, in order to define the orientation of the vote to be given by representatives of the PARTIES in such corporate bodies; 

(o) ECONOMIC VALUE — shall mean the value of the BOUND SHARES, evaluated by the discounted cash flow method, according to criteria usually adopted in the evaluation of companies in the industry, carried out by a reputable expert company, to exercise the preemptive right in case of change of control of the PARTY, as set forth in clauses 11 and 12. 

**CLAUSE TWO – OBJECT**  

2.1 The object hereof is to assure and govern the exercise of the control of COMPANY and its SUBSIDIARIES, the PARTIES being jointly bound to maintain the ownership of a block of SHARES that entitle them on a permanent basis to the majority of votes in the General Meetings, and the power to elect the majority of managers and audit committee members of COMPANY and (by intermediation thereof) of its SUBSIDIARIES. 

**CLAUSE THREE – BOUND SHARES**  

3.1 The following SHARES of each PARTY are bound to the AGREEMENT, which comprise the participation percentage in the entire capital of COMPANY and in the CONTROL BLOCK, as shown in the table below: 

|             |   |                     |       |                      |   |                            |      |   |   |   |       |   |
|------------------|--------|--------------------------|------------|---------------------------|--------|---------------------------------|-----------|--------|--------|--------|------------|--------|
|             |   |                     |       |                      |   | **PERCENTAGE**  
     |
|             |   | **NUMBER OF COMMON**     |       | **IN THE ENTIRE**         |   | **IN THE**                      |
| **PARTY**
  |   | **SHARES**  
  |       | **CAPITAL**  
  |   | **CONTROL BLOCK**  
  |
| VBC              |   |                     | 19,571     |                      |   |                            | 36.26     |   |   |   | 45.32      |   |
| 521              |   |                     | 16,410     |                      |   |                            | 30.40     |   |   |   | 38.00      |   |
| BONAIRE          |   |                     | 7,203      |                      |   |                            | 13.34     |   |   |   | 16.68      |   |
| **Total Shares** |   |                     | **43,184** |                      |   |                            | **80.00** |   |   |   | **100.00** |   |

3.1.1 Pursuant to WHEREAS (iii) above, the PARTIES shall increase the capital of COMPANY upon the transfer of all common and preferred shares issued and owned by CPFL-D and CPFL-G, most of which were jointly purchased thereby, and the least of which were individually purchased by one or some of the PARTIES. For the purposes of the provisions in this clause 3, CPFL-D and CPFL-G jointly purchased shares (hereinafter referred to as “CPFL JOINTLYPURCHASED SHARES”) are those the manner of acquisition of which was one of thefollowing: 

 

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a) shares (common or preferred) purchased (i) atCPFL-D privatization auction (including those alienated by the State and thosecorresponding to the balance not purchased by the employees); and (ii) resultingfrom the share purchase public offer made by DOC 4 Participações S.A.; 

b) CPFL-D and CPFL-G shares subscribed in increases oftheir capitals from November/1997 through March/2002, resulting from theexercise of the preemptive right inherent to the shares referred to in item “a”above; 

c) class “C” preferred bonus shares by CPFL-D,corresponding to the shares referred to in letters “a” and “b” above; and 

d) CPFL-G common and preferred shares, correspondingto the shares referred to in letters “a” to “c” above, received by the PARTIESresulting from the partial split-up of CPFL-D. 

3.1.2After the increase of capital to which sub-clause 3.1.1 refers, in addition tothe SHARES referred to in sub-clause 3.1., the portion of new subscribed sharesissued by the COMPANY corresponding to the transfer of eighty percent (80%) ofthe “CPFL JOINTLY PURCHASED SHARES” shall be bound to the AGREEMENT. AnAmendment to the AGREEMENT to be executed after the increase of capital shallset forth the new amount of BOUND SHARES of each PARTY, the percentage inrelation to the full capital of COMPANY and to the CONTROL BLOCK. 

3.2 ThePARTIES shall be bound at all times to exercise the voting right inherent tothe common shares of the COMPANY, of which they are, now or in the future,holders in accordance with this AGREEMENT, even if some of such shares are notbound to the AGREEMENT, by which they can only grant voting rights to thirdparties on the unbound shares, through a power of attorney, usufruct, pledge oranother proper mean, if the third party is required to vote according to theinstruction of the PARTY that granted such third party the right to vote. 

**CLAUSEFOUR – GENERAL PRINCIPLES IN CONDUCTING CORPORATE MATTERS**  

4.1 ThePARTIES shall be bound to exercise the voting right inherent to the SHARES, thecontrolling power they have over the managers of COMPANY, and its SUBSIDIARIESand ASSOCIATED COMPANIES, and the rights hereunder in order to apply thefollowing principles, guidelines and policies: 

a) to promote and observe the basic objective ofCOMPANY and its SUBSIDIARIES, companies engaged in the electricity powergeneration, transmission, and distribution industry, and like activities, inorder to assure the operation of the facilities and equipment required for theexploration of the respective public service concessions, and to assure thecontinuation, regularity, and quality of the electricity power servicesprovided; 

b) to take into account, in the strategic decisions ofCOMPANY and its SUBSIDIARIES, the interest of the PARTIES to safeguard thecontinuation and expansion of the operations of COMPANY and its SUBSIDIARIES,the financial return of the investments and to promote the provision of properservices by the SUBSIDIARIES, within the quality andcompetitive standards required for the good service to users and in compliancewith the obligations of franchisees; 

 

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c) to implement in COMPANY and its SUBSIDIARIES adividend distribution policy in a currency that entitle its shares thecharacteristics of savings security in order to have periodic income, withoutprejudice of the constitution of the reserves provided for in the ANNUAL BUDGETor in the 5-YEAR BUSINESS PLAN, and that are required for the expansion plan ofits activities and for the improvement of the provision of services of thefranchises explored by the SUBSIDIARIES; 

d) to adopt a dynamic management structure in COMPANYand SUBSIDIARIES within the minimum standard required for its good management,comprised by qualified and reputable professionals; 

e) to prepare guidelines for the activities andmanagement of COMPANY and SUBSIDIARIES to be reflected (i) in the 5-YEARBUSINESS PLAN; and (ii) in the ANNUAL BUDGET of COMPANY and SUBSIDIARIES,prepared in accordance with the 5-YEAR BUSINESS PLAN. 

4.2 Anybusiness or agreement to be executed by COMPANY or its SUBSIDIARIES with aRELATED PARTY shall be concluded strictly based on mutual and marketconditions, as such business or agreement had been contracted with thirdparties. 

**CLAUSEFIVE – PREVIOUS MEETINGS**  

5.1Before any General Meeting or meeting of the Board of Directors of COMPANY, itsSUBSIDIARIES or its ASSOCIATED COMPANIES to resolve on any of the matters setforth in sub-clauses 5.4 and 7.4, the PARTIES, called as provided for insub-clause 5.2, shall meet to define the manner by which the vote will beexercised by their representatives in accordance with the provisions herein. 

5.2 ThePREVIOUS MEETINGS shall be called by the chairman of the Board of Directors ofCOMPANY or its SUBSIDIARY, by any other two members of the Board, actingtogether, by any member of the Board of Directors of the ASSOCIATED COMPANYappointed by COMPANY or further by any of the PARTIES, upon written notice sentby any means to the addresses referred to in sub-clause 17.6, at least three(3) business days in advance. The meetings shall be held at COMPANY’sprincipal place of business or as otherwise previously informed, provided thatsuch place is located in the same city of its principal place of business, atleast twenty-four (24) hours before the General Meeting or meeting of theBoard of Directors. The PREVIOUS MEETINGS calls shall include the agenda to bediscussed, and a copy of any supporting document required should be attachedthereto. 

5.3 ThePREVIOUS MEETINGS shall take place with the presence of the representatives ofthe PARTIES holding at least fifty-one percent (51%) of the BOUND SHARES, thePARTIES being bound to appear thereat by proxies with powers to resolve on theagenda. 

5.4 A PREVIOUS MEETING shall be mandatory forall matters requiring the approval of the General Meeting or for those in whichthe Board of Directors of COMPANY, or its SUBSIDIARIES, can only resolve by thequalified majority (pursuant to sub-clause 7.4). A PREVIOUS MEETING shall alsobe required for the Board of Directors (of COMPANY and its SUBSIDIARIES) toresolve on the following matters: 

a) approval of the other members of the Staff ofOfficers, appointed by the Chief Executive Officer previously elected by theBoard of Directors; and 

 

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b) execution of agreement of any nature ina total amount higher than R$ 20 million, even if such agreement isrelated to the expenses set forth in the ANNUAL BUDGET or in the 5-YEARBUSINESS PLAN. 

5.5 ThePARTIES and their representatives in resolutions of COMPANY or its SUBSIDIARIESshall postpone or adjourn the General Meeting or meeting of the Board ofDirectors called to resolve on a matter subject to the PREVIOUS MEETING when(i) for any reason, until the date of the General Meeting or meeting ofthe Board of Directors, the PREVIOUS MEETING had not been held; or (ii) ifheld, there is no valid decision of the PARTIES. In both cases, thepostponement or adjournment shall be maintained until the PARTIES previouslymeet and a valid decision is made (sub-clause 5.6). In case the valid decisionis not made only in relation to some aspects of the agenda, the PARTIES shallcause such aspects to be removed from the order of the day, and shall resolveon the other aspects as defined in the PREVIOUS MEETING. 

5.6 Allresolutions of the PARTIES in PREVIOUS MEETINGS shall be adopted by the simplemajority (50% + 1) of the BOUND SHARES, except those to which General Meetingis incumbent and those subject to the approval of the qualified majority of theBoard of Directors, as determined in sub-clause 7.4, for which the approval ofthe PARTIES representing at least eighty percent (80%) of the BOUND SHARESshall be required. 

5.6.1In the PREVIOUS MEETINGS each BOUND SHARE entitled to one vote, and the blankvotes or denials shall – for the purposes of the decision on matters requiringthe approval of the qualified majority – be computed as approval of theproposal with the largest number of votes. 

5.6.2The orientation of vote defined by the PARTIES in PREVIOUS MEETING shall befollowed uniformly and in block by the representatives of the PARTIES in theresolutions of COMPANY, its SUBSIDIARY or ASSOCIATED COMPANY resolving thereon.

5.7 Ifthe ANNUAL BUDGET of COMPANY and/or its SUBSIDIARIES had not been approved bythe qualified majority until the first business day of the year to which itrefers, the monthly disbursement (excluding new investments) up to the amountof one-twelfth (1/12) or the budget approved for the previous year, with theadjustment of the respective amounts based on the variation of the *IGP-M*,published by Getúlio Vargas Foundation shall be automatically authorized. Suchdisbursement authorization shall be in force only during the first quarter ofthe subsequent year. After this period, only expenses and investments requiredto assure the operations of COMPANY and its SUBSIDIARIES for the continuationof the provision of services and projects and investments already approved andin progress may be made. 

5.8 Theimpediment to participate by representatives of any of the PARTIES in any ofthe Assistant Committee of the Board of Directors of COMPANY and/or itsSUBSIDIARIES for the reasons set forth in sub-clause 8.9.6 shall not restrict,for any purpose or effect, the participation of the same PARTY in the PREVIOUSMEETING to resolve on such matter, in which it may exercise its voting right infull. 

5.9 Thefailure to appear by any of the PARTIES at a PREVIOUS MEETING duly called andheld shall imply in the full acceptance thereby of the resolution adopted bythe majority of votes of the BOUND SHARES owned by the PARTIES present at themeeting, and the votes corresponding to the SHARES of the absent PARTY shall becomputed as favorable votes for the purposes of calculation of the qualified majorityin the cases required hereunder. 

5.10The chairman of the General Meeting or of the Board of Directors, of COMPANYand its SUBSIDIARIES, shall not compute the vote given by representatives ofthe PARTY in breach of the provisions hereof or the resolutions of the PREVIOUSMEETING (sub-clauses 5.4 and 5.6.2). In such event, anyof the representatives of the other PARTIES may, by submitting a copy of theminutes of the PREVIOUS MEETING in which the matter had been resolved by thePARTIES, required the vote of the party in breach to be considered andcalculated as previously approved in the PREVIOUS MEETING. 

 

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5.11The failure to appear at the General Meeting or the meeting of the Board ofDirectors of COMPANY or its SUBSIDIARIES, as well as the abstention to vote ofthe representative of any PARTY or member of the Board of Directors electedthereby in accordance with this AGREEMENT, entitled any of the representativesof the other PARTIES to participate, as the case may be, in the General Meetingor in the meeting of the Board of Directors, and exercise the voting right (i)in the case of a General Meeting, with the shares owned by the absent ornon-voting PARTY, and (ii) in the case of a meeting of the Board ofDirectors, on behalf of the absent or non-voting member of the board. 

5.12The minutes of the PREVIOUS MEETING shall be summarily transcribed, and,pursuant to art. 130, § 1, Law 6.404/76, it shall be allowed to presentseparate votes and protests, which, initialed by the presents, shall be filed bythe PARTIES – which shall include, clearly and accurately, the resolution ofthe PARTIES and the sense of vote that its representatives – in Generalmeetings and Boards of Directors, of COMPANY and its SUBSIDIARIES andASSOCIATED COMPANIES – shall manifest or approve in the respective resolutions.

5.13Upon the resolution of the majority of the PARTIES, the PREVIOUS MEETINGS maybe tape-recorded. 

**CLAUSESIX – EXERCISE OF THE VOTING RIGHT IN THE GENERAL MEETINGS GENERAL MEETINGS**  

6.1 ThePARTIES shall exercise the voting right in the General meetings of COMPANY –and the latter in the General meetings of SUBSIDIARIES and ASSOCIATED COMPANIES– in accordance herewith. 

6.2Only matters provided for by law shall be submitted to the General Meeting. TheBYLAWS of COMPANY shall provide that the decisions at the General Meeting shallbe made by the simple majority of the attending shareholders present, exceptfor the matters where qualified majority is required by law. 

6.3Notwithstanding the provision in sub-clause 6.2, the PARTIES shall be bound toappear at all General meetings of COMPANY and therein exercise their votingrights in order to assure that the resolutions on any matters be approved, asdefined in the PREVIOUS MEETING, by the vote of the PARTIES holding at leasteighty percent (80%) of the BOUND SHARES 

6.4Without prejudice of the provision in sub-clauses 5.10 and 5.11, and in art.118 of Law 6.404/76, any exercise by any of the PARTIES of the voting right atthe General meetings not in accordance with the resolutions in the PREVIOUSMEETING shall imply invalidity of the vote and vacation of the resolutionadopted, without prejudice of the right of the interested PARTY to promote thespecific execution of the obligation breaches and claim for loss and damages. 

6.5Should either PARTY fail to appear at a General Meeting called to resolve onthe matter submitted for its approval, or in case of appearance, fails to vote,the provision in sub-clause 5.11 and in § 9, art. 118, Law 6.404/76, shallapply. 

6.6 Theprovisions of this clause shall also apply to the resolutions at the Generalmeetings of the SUBSIDIARIES, and, as the case may be, the ASSOCIATEDCOMPANIES. 

 

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**CLAUSE SEVEN – RESOLUTIONS OF THE BOARD OF DIRECTORS**  

7.1.The PARTIES shall be bound to direct the members of the Board of Directors ofCOMPANY, the SUBSIDIARIES and ASSOCIATED COMPANIES elected thereby (sub-clause8.2.1) to vote in the meetings of the Board of Directors, as resolved in thePREVIOUS MEETINGS and the provisions herein. 

7.2.The Board of Directors shall be incumbent to decide on any matter of theinterest of the company, except (i) those attributed by Law exclusively tothe General Meeting; and (ii) those attributed to the Staff of Officers bythis AGREEMENT and by the bylaws of COMPANY and its SUBSIDIARIES. 

7.3 Thedecisions of the Board of Directors shall be – except for the provision insub-clause 7.4 below – made by the simple majority of the members present, andthe Chairman (or in the absence thereof, the Vice-Chairman) shall be entitledto vote in case of a tie. 

7.4Without prejudice of the provision in sub-clause 5.6.2, the approval of thefollowing matters require the approval of seventy percent (70%) of the actingmembers appointed by the PARTIES: 

a) election of the Chief Executive Officer anddismissal of any members of the Staff of Officers (including the Chief Executive Officer);  

b) definition of the dividends policy; 

c) establishment and closure of SUBSIDIARIES;acquisition and disposal of investments in other companies; 

d) approval of the ANNUAL BUDGET of COMPANY,considering that in the absence of agreement with the operating budget of acertain year, that of the preceding year shall prevail, will all amountsadjusted by the variation of the IGP-M in the previous year, according tosub-clause 5.7; 

e) approval of the 5-YEAR BUSINESS PLAN of COMPANY andits annual reviews; 

f) increase of capital of COMPANY within the limit ofthe capital authorized and pricing of the issuance of shares; 

g) issuance of subscription bonus within the limit ofthe authorized capital; 

h) indebtedness of COMPANY – including the provisionof guarantees and assumption of obligations in favor of SUBSIDIARIES andASSOCIATED COMPANIES – beyond the limits provided for in the ANNUAL BUDGET orin the 5-YEAR BUSINESS PLAN; 

i) execution of agreement of any nature in the totalamount higher than R$ 20 million, even if such agreement refers to anexpense provided for in the ANNUAL BUDGET or in the 5-YEAR BUSINESS PLAN; 

j) constitution of any type of guarantee by COMPANY infavor of third parties, in addition to the cases provided for in letter (h); 

 

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l) execution of agreements with the RELATEDPARTIES in an amount higher than R$ 5 million; 

m) selection and substitution of COMPANY’s independentaccountants; 

n) authorization for the purchase of shares issued byCOMPANY itself, for the purpose of cancellation or treasury; 

o) amendments to the franchise agreement of aSUBSIDIARY; 

p) approval of share purchase option plans; 

q) purchase, disposal or encumbrance of any fixedasset of an amount equal to or higher than R$ 20 million; 

r) details of the matters to be submitted to previousanalysis of each of the Committees, as provided for in sub-clause 8.9.4; 

s) compensation of the members of the Committees(sub-clause 8.9.2) that are not part of COMPANY staff. 

7.5 Theresolution of the matters provided for in sub-clause 7.4 concerningSUBSIDIARIES or, as the case may be, ASSOCIATED COMPANIES, is subject to thePREVIOUS MEETING. 

7.6 Theprovisions in sub-clauses 5.10 and 5.11 shall apply to the resolutions of theBoard of Directors of COMPANY and SUBSIDIARIES. 

**CLAUSEEIGHT – COMPOSITION AND OPERATION OF THE MANAGEMENT BODIES**  

8.1Company shall be managed by a Board of Directors and by an Executive Board,which shall be comprised and shall operate according to the BYLAWS and theprovisions hereof. 

8.2BOARD OF DIRECTORS — The Board of Directors of COMPANY shall be comprised by atleast twelve (12) members, one of which will be the Chairman, elected fora one (01) year office, which may be reelected. 

8.2.1.Until such time as the registration for negotiation of COMPANY shares at thestock market does not become effective, the Board of Directors shall beconstituted by twelve (12) members, being: 

a) VBC incumbent of appointing six (6) members; 

b) 521 shall appoint four (4) members; 

c) BONAIRE shall appoint two (2) members; 

8.2.1.1The number of members of the Board of Directors which each PARTY is entitled toappoint, according to sub-clause 8.2.1 above, takes into consideration thecurrent interest of the PARTIES in the CONTROL BLOCK. In case of amendment tothe interest of any of the PARTIES in the total BOUND SHARES, the number ofMembers of the Board which the referred PARTY will be entitled to appoint shallbe adapted to reflect such change, remaining, however,unchanged the number of Members of the Board of the PARTY whose relativeinterest in the total BOUND SHARES was not amended. 

 

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8.2.2Notwithstanding the provisions of sub-clause 8.2.1.1, after the registration ofCOMPANY shares for negotiation in the stock market is completed, (i) thenumber of members of the Board of Directors of COMPANY (sub-clause 8.2) shallbe increased or reduced, depending on the case, so as to always assure the PARTIES,whilst holders of the CONTROL BLOCK, the power of appointing 12 Members of theBoard, and (ii) one or more positions of the Board of Directors shall bedestined to minority shareholders, according to the law or as resolved by thePARTIES. 

8.2.3The PARTIES shall appoint, twenty-four (24) hours in advance of theGeneral Meeting, the persons chosen thereby to be elected to the Board ofDirectors. The PARTIES hereby are bound to vote in block in the persons toappointed, which names shall not be rejected, except in case of failure tocomply with legal provisions. 

8.2.4The Chairman of the Board of Directors shall be appointed at the first meetingheld after the election of its members, among the permanent Members of theBoard appointed by the PARTY which, individually, holds the larger amount ofthe BOUND SHARES and the Vice-Chairman by the PARTY which individually holdsthe second larger quantity of such shares. 

8.2.4.1In case of transfer of BOUND SHARES to a common SUBSIDIARY – understood as suchthe company which, under the terms defined herein, may be deemed SUBSIDIARY ofmore than one of the PARTIES — the right to appoint the Chairman and the Vice Chairmanof the Board of Directors as per sub-clause 8.2.4 shall not be affected, andthese will continue to be appointed according to the criteria establishedtherein, ignoring, for this purpose, the transfer of BOUND SHARES to the commonSUBSIDIARY. 

8.2.5The right to appoint the members of the Board of Directors, according to theprovisions of sub-clause 8.2.1, shall not be assigned to third parties. 

8.2.6It is a condition precedent for the empowerment in the Board of Directors, thatthe Counselor appointed by any of the PARTIES executes the adhesion term to thepresent AGREEMENT, where (i) he acknowledges its contents and is bound tocomply with same, especially in relation to the obligation of uniform blockvote as decided in the PREVIOUS MEETINGS and (ii) undertake severalresponsibility with the PARTY electing him, for the defaults caused by him. 

8.3 In case of adoption of the multiple voteprocesses, the PARTIES shall be bounded to distribute its votes so as toreflect the proportion of the Board of Directors’ composition established undersub-clause 8.2.1 above. 

8.4 In the General Meetings called to fill in thevacancy of counselor, the PARTIES shall vote so as to elect substitutionappointed by the same PARTY indicating the substituted. 

8.5 Anyof the PARTIES may substitute, anytime and without justification, the member(s)of the Board of Directors appointed by same, and the PARTIES hereby undertaketo vote so that the provisions of this sub-clause be complied with. 

8.6 ThePARTIES hereby are bound to dismiss any counselor appointed by them,respectively, who fails to comply with the provisions or the voting guidelinesissued by the PARTIES, according to the present AGREEMENT, being null and voidpossible resolutions taken in disagreement with such guidelines (as foreseenunder clause 6.4), in which case a new meeting shall be held to discuss thematter, amending (if necessary) the resolutions which have not observed the provisions hereof or the guidelines andrecommendations determined by the PREVIOUS MEETINGS (sub-clause 5.4). 

 

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8.7 Themeetings of the Board of Directors of COMPANY shall occur at least once everymonth, in dates to be determined by the Board of Directors during its firstmeeting, and may, however, be held more frequently, should the Chairman of theBoard of Directors so request, by its own initiative or by means of request byany member of the Board of Directors. The meetings of the Board of Directorsshall be called ten (10) days in advance, by notice sent by the Chairmanof the Board, indicating the matters to be discussed and accompanied by thesupport documents possibly required. The presence of all members shall allowthe holding of meetings of the Board of Directors irrespectively of call. 

8.8 Themeetings of the Board of Directors may be validly installed with the presenceof the majority of its members, one of which shall be the Chairman or the Vice Chairman,and its resolutions shall be taken by majority of votes of the attendingMembers of the Board, having the Chairman (and in his absence the Vice Chairman)the quality vote, except for the matters listed under sub-clause 7.4, whichshall only be resolved by a qualified majority of seventy percent (70%) of theactive Members of the Board appointed by the PARTIES. 

8.8.1Should there be no quorum for the installation at first call, the Chairmanshall call a new meeting of the Board of Directors, which may be installed insecond call – to be made at least seven (7) days in advance —, with anynumber, it being hereby established that no matter which is not in the Agendaof the original meeting of the Board of Directors may be discussed under secondcall, except if all Members of the Board are present and they expressly agreeto the new agenda. 

8.9Committees – The Board of Directors, in the resolutions covering the activitiesboth of the COMPANY and its SUBSIDIARIES or ASSOCIATED COMPANIES, shall beassisted by 5 Committees, as follows: (a) Audit Committee, (b)Compensation Committee. (c) Works Committee, (d) Financial ServicesCommittee and (e) Purchase or Sale of Components Committee. 

8.9.1The Audit Committees and the Compensation Committees shall be permanent and theother Committees shall only be called when it is necessary to analyze andmanifest opinion on the matters under their competence (according to sub-clause8.9.4). 

8.9.2The Compensation Committee shall be comprised by six (6) members,appointed by the Board of Directors, being three (3) appointed by VBC, two(2) by 521 and one (1) by BONAIRE. The other Committees shall be comprisedby four (4) members, appointed by the Board of Directors, being two(2) appointed by VBC, one (1) by 521 and one (1) by BONAIRE. Only the Members of the Board may be appointed to the Compensation Committee,being the appointment of non Members of the Board acceptable as members of theother Committees. 

8.9.3The Audit and Compensation Committees may be assisted, in the exercise of theirtasks, by professionals, whether they are or not employees of COMPANY. 

8.9.4The detailing of the matters to be submitted to prior analysis of each of theCommittees shall be defined and ruled by the internal regulations to beapproved by the Board of Directors, being it hereby defined that: 

a) TheAudit Committee shall be responsible for coordinating the internal auditprocedures, appointing independent auditors when necessary and submitting tothe Board an opinion on the approval of the management accounts and financialstatements, and, yet, on specific areas object of audit; 

 

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b) The Compensation Committee shall beresponsible for coordinating the process of electing the Chief ExecutiveOfficer and the process of assessing the whole Executive Board (including the ChiefExecutive Officer), recommending possible dismissals; proposing thecompensation level for the main officers and the profit sharing bonus amountsas a consequence of the performance appraisal; 

c) The Works Committee shall be responsible forevaluating the supplier selection process for construction work and assembly inworks with amounts over R$ 10 million, issuing an opinion on the bestproposal; 

d) The Financial Service Committee shall beresponsible for evaluating the supplier selection process for financialservices for contracts exceeding R$ 10 million, issuing an opinion on the bestproposal; and 

e) the Component Purchase and Sale Committee shall beresponsible for: evaluating the supplier selection process for contractsexceeding R$ 5 million which may involve RELATED PARTIES, issuing anopinion on the best proposal; monitor the closing of Power sales agreementsexceeding R$ 5 million to RELATED PARTIES, assuring the compliance withmarket conditions. 

8.9.5The composition of the Committees defined under sub-clause 8.9.2 above takesinto consideration the current interest of the PARTIES in the control groupconstituted by the BOUND SHARES. In case of amendment to the interest of any ofthe PARTIES in the total BOUND SHARES, the number of Committee members whichthe referred PARTY will be entitled to appoint shall be adapted to reflect suchchange, remaining, however, unchanged the number of committee members of thePARTY whose relative interest in the total BOUND SHARES was not amended. 

8.9.6People who may have, actual or potential conflict of interests or which areconnected to RELATED PARTIES which main activities imply the existence, actualor potential, of conflict of interests, shall not participate of the nonpermanent Committee of Works and of Purchase or Sale of Components. 

8.9.7The matters analyzed by each of the Committees shall be object of reports andproposals, which do not bind the resolution of the Board of Directors. 

8.10EXECUTIVE BOARD – The Executive Board, chosen for a three (3) year term,shall be comprised of six (6) members, being one (1) Chief ExecutiveOfficer, one (1) Strategy Director, one (1) Financial Director (alsoresponsible for Relations with Investors), one (1) Superintendent of PowerManagement, one (1) Distribution Superintendent and one(1) Generation Superintendent. 

8.10.1The Chief Executive Officer shall be elected by the Board of Directors, byqualified majority (sub-clause 7.4 above), from the names listed by theCompensation Committee. The other Executive Board members shall be elected bythe Board of Directors by simple majority vote, from the names listed by the ChiefExecutive Officer, so as to maintain the cohesion of the executive board ofCOMPANY and SUBSIDIARIES. 

8.10.2The Chief Executive Officer of COMPANY shall also be the Chief ExecutiveOfficer of the SUBSIDIARIES, and shall be incumbent, according to item 8.10.1,to submit the names of the professionals who will fill in the other ExecutiveOfficers positions of the SUBSIDIARIES. The Power Management, Distribution andGeneration Superintendents shall be, respectively, the Superintendents (andmain executives) of the SUBSIDIARIES by means of which the activities of powermanagement, distribution and generation will be exercised. 

 

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8.11 Conflict in the Election of the Chief ExecutiveOfficer – In case none of the names submitted by the Compensation Committee isapproved by the Board of Directors (according to sub-clause 7.4), and theposition remains vacant for a period of over two (2) months, this willcharacterize conflict in the election of the Chief Executive Officer, and willbe solved according to the following mechanism: 

a) The Compensation Committee shall appoint up to threeexecutive headhunting companies, the approval of which shall require thefavorable vote of at least five (5) members of the Committee. No companyhaving been approved within thirty (30) days counted from thecharacterization of the conflict, each of the PARTIES, through a Counselormember of the Committee elected by same, may appoint a sole executiveheadhunting company (which complies with the minimum requirements previouslydefined by the Board of Directors); 

b) should the list of executive selection companies becomprised by three names, the second major individual shareholder (taking intoconsideration only the BOUND SHARE) shall eliminate one of the companies andthe main individual shareholder shall choose, from the two remaining companies,the one to select the candidates for the position of Chief Executive Officer.Should there be only two options of executive selection companies, the mainindividual shareholder shall choose, among them, the one to provide theservices of selection of candidates; 

c) the executive selection company chosen according toletter “b” above shall have two (2) months to submit a list comprised ofthree candidates for the position of Chief Executive Officer, and the secondmajor individual shareholder (taking into consideration only the BOUND SHARE)shall eliminate one of the candidates and the main individual shareholder shallchoose, from the two remaining candidates, the one to be the Chief ExecutiveOfficer. 

8.12During the period while the new Chief Executive Officer is being selected, the Chairmanof the Board of Directors shall take over as interim Chief Executive Officer,or, if this is not possible, the Financial Director shall take over. 

8.13Conflict in the choice of Other Directors – Should, after three (3) monthsafter the selection of the Chief Executive Officer, any of the ExecutiveOfficers positions (whether COMPANY or SUBSIDIARY) remains vacant due to thefact that none of the candidates submitted by the Chief Executive Officerhaving obtained the approval of the Board of Directors by simple majority, thiswill characterize the conflict, which will be solved through the followingmechanism: 

The ChiefExecutive Officer shall appoint at least two candidates for the vacant position(being entitled to include a name which was not previously elected), and theBoard of Directors shall elect the candidate chosen by vote of simple majorityof the PARTIES during a PREVIOUS MEETING. 

8.14The Executive Officers members shall be appraised annually by the CompensationCommittee, who will submit its opinion on their performance to the Board ofDirectors. 

8.15The dismissal of the Chief Executive Officer or any other member of the ExecutiveOfficers due to unsatisfactory performance, requires decision of the Board ofDirectors by qualified majority (sub-clause 7.4). 

8.16The Chief Executive Officer may dismiss any member of the Executive Officers,and shall inform his decision and the reasons for same to the CompensationCommittee and, for legal purposes, the formalizationof the dismissal shall occur during the next meeting of the Board of Directors,and the substitution shall be chosen and elected according to sub-clauses8.10.1 and 8.13. The position of the dismissed Manager shall, up to theappointment of his substitution, held by the Manager appointed by the ChiefExecutive Officer. 

 

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8.17The rules dealing with sub-clauses 8.13 to 8.16 shall apply to the Managers ofthe SUBSIDIARIES. 

**CLAUSENINE – MANAGEMENT BODIES OF THE SUBSIDIARIES AND ASSOCIATED COMPANIES**  

9.1 Thecomposition, operation and resolutions of the Board of Directors and ExecutiveOfficers of the SUBSIDIARIES shall observe the provisions hereof. Wheneverpossible, the people elected to be part of the Board of Directors of theSUBSIDIARIES shall be the same people elected by the PARTIES for the Board ofDirectors of COMPANY. 

9.2 TheExecutive Officers of the SUBSIDIARIES shall be comprised by the number ofmembers more suitable to their requirements, as resolved by the PARTIES, takinginto consideration a proposal of COMPANY’s Chief Executive Officer. 

9.3Where applicable, the same rules shall be applied in relation to the ASSOCIATEDCOMPANIES where COMPANY elects Members of the Board. 

**CLAUSETEN – AUDIT COMMITTEE**  

10.1Company shall have an Audit Committee which will operate under permanentcharacter and shall be comprised of three (03) or five (05) permanentmembers and corresponding alternates, with term up to the Annual GeneralMeeting subsequent to its election, and may be reelected. 

10.2The composition, competence and operation of the Audit Committee shall observethe terms of the BYLAWS and of the law. 

**CLAUSEELEVEN – LIMITATIONS TO THE TRANSFER OF SHARES**  

11.1The PARTIES mutually grant the first refusal right to, under equal conditionswith third parties and observing the procedures provided under sub-clause 11.3,acquire the BOUND SHARES which one of them intends to dispose of. 

11.2The OFFEROR is bound not to dispose his BOUND SHARES except through one of thefollowing types of legal business: 

I — purchase and sale, hypothesis when the offer tothe remaining PARTIES must be under the same price and payment conditions ofthe offer to third parties; 

II – on the grant in payment, case in which the offerto the other PARTIES shall be of sale for a price equal to the debt valuepayable with the delivery of the BOUND SHARES. 

11.2.1The disposal of BOUND SHARES by the OFFEROR may occur by means of type of legalbusiness different from that indicated under sub-clause 11.2 above provided theremaining PARTIES agree to them, at their exclusive discretion. 

 

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11.3 The OFFEROR shall offer to the other PARTIES thedisposal of the BOUND SHARES offered, under the same conditions of the proposalof the third interested party, observing the following rules: 

I – the offer to the other PARTIES shall be inwriting, by means of letter delivered to the Chairman of the Board of Directorsof COMPANY, accompanied by copy of the unconditional proposal of the thirdinterested party, with effectiveness not inferior to forty-five (45) days;

II – the Chairman of the Board of Directors ofCOMPANY, within the five (5) days subsequent to their receipt, shall send copyof the offer to the other PARTIES. 

III – within thirty (30) days counted as of thereceipt of the copy of the offer, the other PARTIES shall bear the firstrefusal right to acquire the BOUND SHARES offered under the same conditions ofthe proposal of the third interested party, without any change or amendment,and the preference shall be exercised on all BOUND SHARES object of the offer.Should more than one PARTY accept the offer, the BOUND SHARES held by each ofthem, shall be apportioned pro-rata the BOUND SHARES held by each one, nottaking into consideration, for the apportionment, the BOUND SHARES of the OFFEROR;

IV – the exercise of the first refusal right shall(a) cover all BOUND SHARES offered and (b) be notified in writing tothe Chairman of the Board of Directors of COMPANY within the term granted inthe above item, after which the first refusal right will expire. 

V – once the first refusal right has been exercisedand the provisions of item VI observed, the Chairman of the Board of Directorsof COMPANY shall immediately notify the OFFEROR if the other PARTY(IES)exercised such right, and the disposal of the shares object of the offer shallbe implemented within sixty (60) days counted from the end of the term forexercise of the preference as provided under item III; 

VI – Should the Offer Receiving Parties not exercisetheir first refusal right, or should such right expire, the OFFEROR may disposeof the BOUND SHARES to the third proponent under the exact terms of theproposal, provided such disposal is completed within ninety (90) days fromthe end of the term provided under item III of this sub-clause; 

VII – any modification of the disposal conditionsindicated in the proposal of the third proponent, or the expiry of the termreferred under item VI without the disposal to third party having beencompleted, will evidence a new and different disposal, which shall only becontracted after a new offer to the other PARTY(IES), under the terms of thissub-clause, so that these may exercise their first refusal right. 

11.4Any of the PARTIES receiving the offer under the terms of sub-clause 11.3 maychoose to dispose, together with the OFFEROR, its BOUND SHARES to the thirdproponent, it being adjusted that: 

I – should the third party offer not be extendable toall BOUND SHARES, being only restricted to a given quantity of SHARES, thePARTIES which decide not to exercise their first refusal rights and prefer tosell their shares jointly, shall be entitled to dispose to the third party,together with the OFFEROR, a portion of their shares pro-rata to the interestof each of then in the total BOUND SHARES (not taking into consideration theSHARES of the PARTY who does not wish to sell them); 

 

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II — Notwithstanding the provisions of itemI above, in case of an acquisition of BOUND SHARES by a third party (who is notPARTY hereof) result in such third party becoming the major individualshareholder of the control block, the other PARTIES may choose to sell thetotality of their SHARES to such third party, in which case the offer of thethird party shall mandatorily provide for this possibility and encompass the obligationof acquiring the SHARES from the other PARTIES. 

III — the other PARTIES which receive the offer underthe terms of this sub-clause 11.4 shall manifest, within the term of exerciseof the first refusal right (sub-clause 11.3 item III) the option of disposing,depending on the case, (items I and II above) part or all their BOUND SHARESunder the penalty of loosing such right, thus releasing the third proponentfrom the obligation of acquiring them; however, should the disposal option beexercised, the BOUND SHARES adhering to the offer and the OFFERORS shall betransferred to the third proponent by the same instrument. 

IV – inthe case covered by item II above, the offer of the third proponent shall benull and void, for the purposes and effects of the sub-clause 11.3, if it doesnot contain the obligation of acquiring all shares of the remaining PARTIES. 

11.4.1The provisions of sub-clause 11.4 do not apply to the disposal of BOUND SHARESby BONAIRE for as long as it holds less than twenty percent (20%) of interestin the CONTROL BLOCK. 

11.5The first refusal right mutually granted under sub-clause 11.1 shall not applyin case of transfer of BOUND SHARES to the AFFILIATE, provided that: 

I – The AFFILIATE declares previously and in writingto the other PARTIES and to COMPANY’s Executive Officers its unrestrictedadhesion to the AGREEMENT; 

II – Being the AFFILIATE controlled by the disposingPARTY, it previously and in writing undertakes to the other PARTY(IES) not totransfer, at whatever title or under whatever form, including as a consequenceof a merger, incorporation or scission transaction, the control of theAFFILIATE, except if it re-buys in advance the BOUND SHARES transferred to theAFFILIATE under the terms of this sub-clause; 

III – Being the AFFILIATE the controller of the PARTY,or a company under common control, the end controlling shareholder of theAFFILIATE undertakes, in writing, to the other PARTY(IES) not to transfer, atwhatever title or under whatever form, including as a consequence of a merger,incorporation or scission transaction, the control of the AFFILIATE, except ifit re-buys in advance from the AFFILIATE all SHARES held by same and(b) unrestrictly adheres to the AGREEMENT by means of a letter sent to theother PARTY(IES) and to COMPANY’s Executive Officers. 

11.6The exclusion of the first refusal right foreseen under sub-clause 11.5 doesnot cover the transfer, at any title, of BOUND SHARES to the AFFILIATE of whichcapital there participate, directly or indirectly, more than one of thePARTIES, in which case the provisions of sub-clauses 11.1 to 11.3 shall apply. 

11.7The PARTY transferring BOUND SHARES to the AFFILIATE shall be legally andseverally liable, irrespectively of any additional formality, together with theAFFILIATE, for the compliance of its obligations foreseen under the AGREEMENTor resulting from its performance. 

 

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11.8 The provisions of sub-clauses 11.1 to 11.3 applyto the first refusal right of the PARTIES to the subscription of SHARES ofcapital increase of COMPANY, which shall bear preemptive rights on such capitalincrease pro-rata the number of SHARES held by them. 

11.9Should BOUND SHARES of any of the PARTIES come to be subject to arrest, seizureor judicial pledge, this fact shall imply the irrevocable offer by the PARTYsubject to JUDICIAL LITIGATION to the other PARTY(IES) to sell the LITIGATIONSHARES, observing the following provisions: 

I – the sales price of the LITIGATION SHARES shall beequal to its ECONOMICAL VALUE determined (where applicable) under the terms ofsub-clauses 12.4 and 12.5; 

II – once the arrest, seizure or judicial pledge hasoccurred, by means of service of process to COMPANY, the sales offer will bedeemed made, as covered by this sub-clause, and, consequently, the followingrules shall apply: 

a) within ten (10) days as of the arrest, seizureor judicial pledge notice, there shall start the determination of the ECONOMICVALUE of the LITIGIOUS SHARES (being the cost of such evaluation paid by thePARTY holding same), which, after determined, shall be notified by COMPANY tothe other PARTIES; 

b) during the fifteen (15) days subsequent to thenotice of the ECONOMIC VALUE of the LITIGATION SHARES, the other PARTY(IES) shall notify the PARTY holding the LITIGATION SHARES and the COMPANYof the exercise of the first refusal right, which shall only be validlyexercised if it involves the totality of the LITIGATION SHARES. Should morethan one PARTY exercise its first refusal right, the LITIGATION SHARES shall beapportioned pro-rata the SHARES held by each PARTY; 

c) once the right to acquire the LITIGATION SHARES hasbeen exercised, the payment of the price shall be made as per the form andplace determined by the judge ordering the judicial constraint of theLITIGATION SHARES, observing the following procedure: 

(i) should the credit guaranteed by the constraint ofthe LITIGATION SHARES, including court costs and legal counsel fees, isinferior to the ECONOMIC VALUE of the LITIGATION SHARES, the surplus of theLITIGATION SHARES acquisition price shall be paid directly to the disposingPARTY; 

(ii) should the credit guaranteed by the constraint ofthe LITIGATION SHARES, including court costs and legal counsel fees, exceed theECONOMIC VALUE of the LITIGATION SHARES, the PARTY holding the LITIGATIONSHARES shall supplement the funds required for the Court Guarantee, under thepenalty of, by not doing so, such supplementation be made by the PARTY(IES)exercising the first refusal right. In this case, the PARTY holding the LITIGATIONSHARES, shall be bound to return the amount paid as supplement, accrued by nonreducible compensatory fine of 20% on the value corrected by the fluctuation ofthe IGP-M plus interest on arrears of at 1% per month or fraction. 

 

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d) once the price of the LITIGATION SHAREShas been paid, should the SHARES transfer not be made by act of the Judge, thePARTIES shall execute the legal instrument of transfer of title; 

III – should the judicial order of arrest, seizure orjudicial pledge of the LITIGATION SHARES be revoked (including due tosubstitution of the asset object of the judicial constraint) within sixty(60) days counted from the date of the legal notice to COMPANY asmentioned under item II above, the offer of sale ruled under this sub-clauseshall be deemed cancelled, and the PARTY holding the LITIGATION SHARES shall(a) evidence the revocation of the legal proceedings by means of deliveryto the other PARTY(IES) a certified copy of the revocation order, at or up tothe sixty-first date of the date of the notice to COMPANY of the arrest,seizure or judicial pledge and (b) reimburse COMPANY or the other PARTIES,depending on the case, for the reasonable costs incurred up to then todetermine the ECONOMIC VALUE. 

11.10Should any of the PARTIES transfer, under the terms of sub-clause 11.5, part ofits BOUND SHARES to an AFFILIATE, the following rules shall be observed:(I) for the purposes provided under sub-clauses 11.1 to 11.4, inclusive,the PARTY transferring the BOUND SHARES and its AFFILIATE shall be deemed asole shareholder of COMPANY, and, in case of disposal of BOUND SHARES by suchPARTY or its AFFILIATE, the offer ruled under sub-clause 11.3 shall be madeeffective to the other PARTIES, which shall hold the first refusal rightassured under sub-clause 11.1; (II) the acquisition of shares, in case ofsales offer ruled under sub-clause 11.9, shall be made by the PARTY orAFFILIATE holding the larger quantity of BOUND SHARES on the date of the noticeto COMPANY of the arrest, seizure or judicial pledge. 

11.11 In case of sale, assignmentor transfer, by 521 and VBC, of the BOUND SHARES belonging to same, whichresult, after such transaction, in an interest share inferior to 20% and 30%,respectively, of the BOUND SHARES, and provided BONAIRE has not exercise itsfirst refusal right for the acquisition of such shares, under the terms of thisclause 11, BONAIRE shall be entitled to, at its exclusive discretion, sell thetotality of the BOUND SHARES belonging to same together with the BOUND SHARESowned by 521 or VBC object of the sale, assignment or transfer, for the sameprice, term and other conditions agreed upon. In order to implement theprovisions of this sub-clause, 521 and VBC shall, whenever they aim at sellingBOUND SHARES pertaining to them, include the BOUND SHARES pertaining to BONAIRE in the corresponding negotiation. 

11.12The restrictions stipulated in this clause do not apply to the transfers of one(1) SHARE to each person to be appointed as member of the Board ofDirectors of COMPANY, which is not a shareholder, provided the beneficiary isbound to return the SHARE received as soon as it ceases being a COMPANYmanager. The SHARES so transferred shall be computed in the lot of SHARES ofthe disposing PARTY, which shall be responsible before the other PARTIES forthe compliance of the obligations arising from the present AGREEMENT by thebuyer of the SHARE, under the terms of this sub-clause. 

11.13It is a condition precedent to any transfer of BOUND SHARES that thecorresponding buyer unconditionally adheres to the present AGREEMENT, keepingthe acquired SHARES bound hereto. 

11.14The PARTIES shall be prohibited of selling SHARES in the market, after thestart-up of the public distribution of common shares of COMPANY, for the termdefined together with the Global Coordinator of the primary share offer. 

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**CLAUSE TWELVE – CHANGE OF CORPORATE CONTROL OF A PARTY**  

12.1 In case of direct or indirect change of thecorporate control of any PARTY (the OFFEROR) the other PARTIES shall beentitled to acquire all BOUND SHARES pertaining, directly or indirectly, to theOFFEROR, by the ECONOMIC VALUE. 

12.1.1For the purposes of this clause, change of corporate control will be evidencedby the acquisition — under whatever form and title — by a third party (which,at the date of execution HEREOF was not part of the PARTY control group) ofshares, quotas or partner rights assuring same the prevalence in the corporateresolutions of the PARTY. 

12.2The provisions of sub-clause 12.1 also applies to the change of corporatecontrol resulting from: 

a)admission of a new partner upon capital increase of the OFFEROR or of a companyholding, directly or indirectly, its control; 

b)merger, incorporation or scission of the OFFEROR or of a company holding,directly or indirectly, its control; 

c)disposal of shares of the corporate capital of the OFFEROR, of a companyholding, directly or indirectly its control or of company controlled by OFFERORowner of BOUND SHARES. 

12.3 In the case of 521 and BONAIRE, the corporatecontrol of which are held by Investment Funds – to wit de Investimento em Ações BB Carteira Livre I and Fundo de Investimento Financeiro BB Renda Fixa IV(521) and Icatu Energia São Paulo Fundo Mútuo de Investimento em Ações —Carteira Livre (BONAIRE) – the provisions of this clause shall apply to anychange implying that a third party becomes the holder of the absolute majorityof its quotas. The shareholding composition of 521 and BONAIRE and thecomposition of the Investment Funds controlling same constitute attachments 1and 2 hereof. 

12.4Should there be changes of the corporate control of the OFFEROR, includingunder the terms of sub-clauses 12.2 and 12.3, the following rules will beobserved: 

a) the OFFEROR shall notify in writing the other PARTIESof this fact, as well as the Chairman of the Board of Directors of COMPANY,within maximum thirty (30) days counted from the date of the change ofcontrol, informing, in such notice, (i) the identity of the new controllerand (ii) the ECONOMIC VALUE of the SHARES, determined by a specializedcompany to be chosen by same (referred below as FIRST EVALUTION); in case ofchange of control resulting from merger, incorporation or scission, the noticecovered by this item shall be made by the surviving company; 

(b) the other PARTIES shall, within thirty(30) days counted from the receipt of the notice mentioned under(a) above, notify in writing the OFFEROR and the Chairman of the Board ofDirectors of COMPANY whether they accept or reject the value of the FIRSTEVALUATION of the SHARES, and, should they accept it, such acceptance shallimply the exercise of the right assured them by this Clause; 

(c) should they not accept the value of the FIRSTEVALUATION, they may request the procedure of determination of the new ECONOMICVALUE of the BOUND SHARES of the OFFEROR (this new evaluation hereinaftercalled SECOND EVALUATION), as provided under sub-clause 12.5 below; 

 

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(d) once the first refusal right isexercised, the purchase and sale of BOUND SHARES shall be hired during thefifteen (15) days subsequent to the date of the exercise and the priceshall be paid cash simultaneously with the transfer of title of the SHARES; 

(e) Should the OFFEROR or its new controller, bebound to sell its BOUND SHARES as a consequence of change of control, fail tomake the transfer of title of such SHARES, the other PARTY(IES) exercisingtheir first refusal right under the terms of this Clause may (i) make ajudicial deposit of the price of the BOUND SHARES, and (ii) request anArbitral Award or Judicial Ruling producing the same effect of a purchase andsale agreement. 

12.4.1A delay of over sixty (60) days of the notice mentioned under “a” ofsub-clause 12.4 shall imply the charge of a fine at one half per cent (0,5%) ofthe ECONOMIC VALUE of the SHARES, for each month of delay, being the finediscounted from the price payable by the PARTY(IES) exercising the firstrefusal right. 

12.5The procedure of determination of the value of the SECOND EVALUATION of theSHARES shall be done as follows: 

(a) the interested PARTIES shall appoint aspecialized company in Corporate Evaluation, with national reputation, todetermine the amount of the SECOND EVALUATION, the award of which shall bedelivered within sixty (60) days from the notice mentioned under “a” ofsub-clause 12.4. The purchase price of the BOUND SHARES shall be the average ofthe amounts of the FIRST EVALUATION and of the SECOND EVALUATION, provided thedifference between the two evaluations does not exceed twenty percent (20%). Shouldthe two evaluations show values with differences over 20%, the purchase priceof the BOUND SHARES shall be determined by a third specialized first linecompany, chosen by the companies preparing the awards corresponding to theFIRST EVALUATION and to the SECOND EVALUATION, and the amount determined in theuntie report shall be the final sales price of the BOUND SHARES. In case ofconflict in the choice of the company to prepare the untie report, the matterwill be solved by arbitration, according to clause 16. 

b) each interested PARTY shall bear the cost of theevaluation ordered by same; and the cost of the untie report shall be borne inequal parts by the OFFEROR (50%) and the remaining interested PARTIES (50%). 

(c) once determined the purchase price of theBOUND SHARES under the terms of this sub-clause, the Chairman of the Board ofDirectors of COMPANY shall notify the interested PARTIES so that they exercisethe first refusal right within fifteen (15) days. 

12.5.1The interested PARTIES shall loose the first refusal right ruled by this Clauseif they do not provide for its evaluation report on the purchase price of theBOUND SHARES within the terms foreseen under sub-clause 12.5 “a”, nor exercisetheir first refusal right within the terms and conditions defined under thisClause. 

12.6The provisions of the above sub-clauses do not apply to the corporaterestructures where the ownership of the BOUND SHARES is transferred by singularor universal succession, provided the corresponding successors give writtennotice to the other PARTIES and to the Executive Officers of COMPANY of theirunrestricted adhesion to the AGREEMENT within the thirty (30) dayssubsequent to the acquisition of the BOUND SHARES, however always beforeexercising any right arising herefrom. Should there occur the case covered bythis sub-clause, the successors of the PARTY shall be deemed, for the purposeof exercise of the rights and compliance of the obligations stipulated herein,as jointly constituting one sole PARTY. 

 

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12.6.1 In the absence of the notice foreseen in theprevious sub-clause, within the term define, the PARTIES interested inexercising the first refusal right shall notify the successor of the PARTYundergoing reorganization to, within fifteen (15) days after the notice,manifest on its unrestricted adhesion to the AGREEMENT. After the term coveredby this sub-clause without there being no written manifest of adhesion, theinterested PARTIES may exercise the first refusal right anytime according tothe following procedure: 

(a) any of the interested PARTIES shall notifythe OFFEROR (understood as such, for the purpose of this sub-clause, thesingular or universal successor of the PARTY which fails to adhere to theAGREEMENT under the terms of sub-clause 12.6), the Chairman of the Board ofDirectors of COMPANY and the remaining PARTIES of its intent of acquiring theBOUND SHARES and requesting COMPANY to order an evaluation report on theECONOMIC VALUE which shall be the final purchase price of the BOUND SHARES. 

(b) within thirty (30) days after thereceipt of the notice of COMPANY informing the sales value of the BOUND SHARESthe interested PARTIES shall confirm to the Chairman of the Board of Directorsof COMPANY and to the OFFEROR its decision of acquiring the OFFERED SHARES. 

(c) once the first refusal right is exercised,the purchase and sale of BOUND SHARES shall be implemented during the fifteen(15) days subsequent to the date of the exercise and the price shall bepaid cash simultaneously with the transfer of title of the SHARES; 

**CLAUSETHIRTEEN – LIEN OF THE BOUND SHARES**  

13.1The BOUND SHARES shall not be object of whatever type of lien, except in thefollowing cases: 

(a) if the creditor is BNDES and/or BNDESPAR andthe guaranteed debt arises, directly or indirectly, from finance granted(i) to investments in the CONTROLLED or ASSOCIATED COMPANIES or(ii) to COMPANY itself; or 

(b) if the creditor, by letter written to theCOMPANY Executive Officers and to the other PARTIES, before the constitution ofthe material lien, (i) subordinates its right of enforcing the guarantee to thefirst refusal right of the PARTIES as ruled under Clause 11 and(ii) undertake not to interfere in the voting rights of the encumberedshares, even in case of default of the guaranteed debt; or 

(c) should all other PARTIES notify COMPANY thatthey agree with the lien intended by one of them. 

13.2 In case of constitution of material lien onbehalf of BNDES/BNDESPAR made under the terms of item (a) of the previoussub-clause, the PARTIES agree to subordinate the voting rights of the BOUNDSHARES encumbered to the conditions adjusted with the BNDES/BNDESPAR by theinterested PARTY. 

13.3The constitution of material liens on the BOUND SHARES without observing theprovisions of this Clause shall not be valid nor shall it produce any effectsbefore COMPANY and other PARTIES. 

 

 

 

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13.4 521 and BONAIRE are aware that: 

a) VBC has incurred debts within the FederalPrivatization Program by means of different issues of debentures (3rd, 6th and8th issues) which were subscribed by the BNDESPAR (hereinafter referred to as“debentures”) for the purpose of participating of the privatization of projectsof the electrical area; 

b) currently, shares issued by CPFL-D and CPFL-G ownedby VBC were given as guarantee of the payment of the “debentures” and/or boundto the exercise of the BNDESPAR right of “converting” part of its “debentures”in shares of such companies; 

c) in order to enable the public distribution ofCOMPANY shares (as referred to in the WHEREAS (iv), it is necessary to releasethe CPFL-D and CPFL-G shares of the above mentioned liens; 

d) for such purpose, VBC : (i) sill substitutethe CPFL-D and CPFL-G shares given as guarantee of the payment of the“debentures” for BOUND SHARES belonging to VBC, which shall be subject to thetransfer limitation of shares ruled under clause 11, and (ii) shallsubstitute, by COMPANY shares not bound hereto, the CPFL-D and CPFL-G sharesblocked to cover for the (possible) exercise of the BNDESPAR right of convertingpart of its “debentures” in shares of such incorporations. 

**CLAUSEFOURTEEN – TERM**  

14.1The duration hereof is twenty-five (25) years, being automatically renewedfor equal and successive periods of five (5) years, should none of thePARTIES denounce it with the minimum advance of six (6) months prior tothe end of the contractual term than in force. 

**CLAUSEFIFTEEN – SPECIFIC ENFORCEMENT**  

15.1The PARTIES hereby acknowledge and state that the mere payment of losses anddamages shall not constitute adequate compensation for the default ofobligations undertaken hereby. 

15.2The PARTIES shall be entitled to request to the President of the GeneralMeeting and the Members of the Board elected by appointment of the PARTIESshall be entitled to request to the Chairman of the Board of Directors todeclare the invalidity of vote issued against or in disagreement of theprovisions hereof. 

**CLAUSESIXTEEN – DIVERGENCIES AND ARBITRATION**  

16.1Any controversy arising from the performance or interpretation of the AGREEMENTwhich is not amicably resolved within thirty (30) days after one of thePARTIES having informed the other PARTIES in writing on the existence of suchcontroversy, shall be subject to the judgment of the Market Arbitration Chamberinstituted by BOVESPA (Securities Exchange of the State of São Paulo)(hereinafter simply called “Arbitration Court”). The Arbitration Court shall becomprised of as many referees as the diverging PARTIES and of one other refereewho shall act as President of the Arbitration Court, to be chosen by the otherreferees. The choice of the referees shall be done by the PARTIES involved inthe dispute, being each PARTY sustaining a diverging position the appointmentof a representative in the Arbitration Court. The President of the Arbitration Court shall have, in addition to his vote, the quality vote in case of tie. 

16.2The Arbitration Court shall observe the procedural rules of the MarketArbitration Chamber Regulation as instituted by BOVESPA. The Arbitration Court shall meet in the City of São Paulo, State of SãoPaulo, and its decision shall be final, obliging the PARTIES and theirsuccessors at whatever title. The Arbitral award shall constitute an executiveextrajudicial security, for the purpose of enforcing its content against thePARTIES refusing to comply with its ruling. 

 

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16.3The arbitral award shall determine that the arbitration costs or costs ofwhatever legal proceedings referring to the arbitration or arising therefrom,including legal counsel fees, experts, referees and court costs shall be borneby the defeated PARTY(IES). Should the arbitral award be partially favorable toall PARTIES, the Arbitration Court shall specify the form and proportionwhereby each PARTY shall bear the costs and expenses. 

16.4 Withoutprejudice of the provisions of this Clause, the PARTIES hereby acknowledge andstate reciprocately their legitimate interest in exercising the right to suebefore the Judicial Power, provided this is exclusively addressed to urgentprotective injunction, to, by means of the obligation of the legal ruling,assure the effectiveness of the arbitration judgment whenever this isnecessary, through strict caution preventive and restrictive measures, with apreparation or incidental character. 

**CLAUSESEVENTEEN – GENERAL PROVISIONS**  

17.1The PARTIES hereby undertake, by itself or its successors at whatever title, tocomply with the present AGREEMENT such as contained herein. 

17.2The failure to exercise, in whole or part, the rights attributed hereby to any ofthe PARTIES shall not imply waiver or novation, being characterized as mereliberality act. 

17.3Any amendment hereto shall only be valid if made by written instrument,executed by all PARTIES. 

17.4Should any provision hereof be deemed undemandable as a consequence of arbitralaward or legal ruling, the PARTIES hereby undertake to proceed to thesubstitution of such provision by another leading to equivalent result, so asto preserve, to the maximum possible extent, the integrity of the commitments reciprocatelyundertaken hereby. 

17.5The monetary values expressed herein shall be updated on January 1st of eachyear, according to the fluctuation of the General Market Price Rate – IGP-M,published by Getúlio Vargas Foundation, or, in its absence, of another ratepublished by the same Foundation, reflecting the loss of acquisition power ofthe local currency occurring during the period. 

17.5.1Should the rates reflected herein fail to reflect the evolution of the relativeprices in the country, the PARTIES shall proceed to review the monetary valuesexpressed herein for the purpose of adjust them to the actual evolution ofprices. 

17.6All notices provided for herein shall be done in writing and deemed actuallygiven when transmitted by cable, facsimile or electronic data transmission (ineach case, subject to the receipt of the appropriate receipt code or anyreceipt confirmation by the receiving PARTY) or when delivered by hand or sentby certified letter to the address of the PARTIES, as indicated below: 

If toVBC: 

VBC ENERGIA S.A. 

Avenida Engenheiro Luís Carlos Berrini, no 1297-1307, 13o andar,conjunto 132 

 

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ZIP CODE 04571-010 São Paulo, SP

Attn: Marcelo Maia de Azevedo Corrêa (President) 

Phone: (11) 5102-7050 

Fax: (11) 5505-9161 

e-mail: mcorrea@vbcenergia.com.br; and 

 

Attn.: José Said de Brito (Director) 

Phone: (11) 3225-3168

Fax: (11) 3361-3624

e-mail: said@votorantim-energia.com.br 

 

If to 521: 

521 PARTICIPAÇÕES S.A.,

 Praia de Botafogo, 501 — 4o andar — Botafogo

ZIP CODE: 22.250-040 — Rio de Janeiro — RJ 

Attn: Gilberto Audelino Correa (Director ofRelations with Investors) 

Phone: (21) 3870-1011

Fax: (21) 3870-1951

e-mail: dirin@previ.com.br 

Attn: Sergio da Silva Rosa (Director ofInterests of PREVI)

 Phone: (21) 3870-1021

Fax: (21) 3870-1051

e-mail: dipar@previ.com.br 

Attn: Aloisio Macário de Souza (TeamManager – Interest Management)

 Phone: (21) 3870-1202

Fax: (21) 3870-1220

e-mail: macario@previ.com.br 

If to BONAIRE 

BONAIRE PARTICIPAÇÕES S.A.,

Attn: Carlos Eduardo Reich

Av. Presidente Wilson, 231 — 9o andar

ZIP CODE 20.030-021 — Rio de Janeiro — RJ 

Phone: (21) 3804-8722

Fax: (21) 2533-3136

e-mail: creich@icatu.com.br 

 

17.7Under the terms of article 118 of Law No. 6404 of 1976, the presentAGREEMENT shall be filed at the COMPANY headquarters and recorded into thebooks of the financial institution depository of the of record shares ofCOMPANY, which shall take note in the deposit account of the BOUND SHARES andcorresponding statement provided to the PARTIES of the following text: 

“The sharesrepresented by the present certificate or object of the present depositaccount, are subject to the system of the Shareholders Agreement executed between VBC Energia S.A., 521 Participações S.A. and Bonaire Participações S.A. on [day] of [month] of [year], ruling the disposal andencumbrance of such shares and of the subscription rights arising therefrom.This shareholders’ agreement is filed at COMPANY’s headquarters for allpurposes and effects of article 119 of Law number 6404/76.” 

 

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17.8After the registration for negotiation of COMPANY shares within StockExchanges, should it be further decided to cancel their registration of opencompany for negotiation of shares in the market, the minority shareholdersshall be entitled to sell its shares for their economic value as ruled underarticles 4 and 4-A of Law 6404/76, with the wording given by Law 10.303/2001. 

17.9COMPANY attends the present AGREEMENT to become aware of its terms, obliging toobserve it and to file it within its headquarters. 

17.10The SUBSIDIARIES shall, for the purposes and effects of article 118 of Law6404/76, notified of the existence hereof, and a certified copy shall be sentthereto to be filed in its headquarters. 

17.11All and any matter arising from the performance hereof shall be decided at theCourts of COMPANY’s headquarters. 

INWITNESS WHEREOF, the PARTIES execute the present AGREEMENT in six (6)counterparts of equal tenor and for one sole effect, in the presence of the twoundersigned witnesses. 

     São Paulo, March 22, 2002 

 

VBC ENERGIA S.A. 

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521 PARTICIPAÇÕESS.A., 

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Continuation of the signatures of the Shareholders’Agreement of Draft II Participações S.A. executed on March 22, 2002. 

 

BONAIREPARTICIPAÇÕES S.A., 

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| Title:        |   | Title:        |

DRAFT IIPARTICIPAÇÕES S.A. 

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**AMENDMENT No. 1 TO THE SHAREHOLDERSAGREEMENTOF CPFL ENERGIA S.A. (former Draft II Participações S.A.)**

By thisprivate instrument, the parties:

     **VBCENERGIA S.A**., former Serra da Mesa Energia S.A., a joint-stock corporationwith offices in the city of São Paulo, State of São Paulo, at AvenidaEngenheiro Luís Carlos Berrini No. 1297/1307, 13rd floor, suite 132,enrolled with the National Register of Legal Entities (“CNPJ/MF”) under No.00.095.147/0001-02, hereinafter simply referred to as “VBC”;

     **521PARTICIPAÇÕES S.A**., a joint-stock corporation with offices in the city ofRio de Janeiro, State of Rio de Janeiro, at Praia de Botafogo No. 501 – 4thfloor, enrolled with the National Register of Legal Entities (“CNPJ/MF”) underNo. 01.547.749/0001-16, hereinafter simply referred to as “521”;

     **BONAIREPARTICIPAÇÕES S.A**., a joint-stock corporation with offices in the city ofSão Paulo, State of São Paulo, at Avenida Paulista No. 37, 10thfloor– part occupancy, enrolled with the National Register of Legal Entities(“CNPJ/MF”) under No. 02.117.801/0001-67, hereinafter simply referred toas “BONAIRE”; and they may be individually referred to as PARTY, orcollectively PARTIES;

and, asIntervening Consenting Party,

     **CPFLENERGIA S.A.**, former Draft II Participações S.A., a joint-stock corporationwith offices in the city of São Paulo, State of São Paulo, at Rua Ramos BatistaNo. 444, enrolled with the National Register of Legal Entities (“CNPJ/MF”)under No. 02.429.144/0001-93, hereinafter simply referred to as “COMPANY”;the PARTIES and COMPANY being represented according to their respective bylaws,

WHEREAS:

| (a)    |   | On March 22, 2002 the PARTIES  executed the Shareholders Agreement of Draft II Participações S.A. (the  “AGREEMENT”), by which the PARTIES (i) were bound to increase the capital of  COMPANY; (ii) expressed their wish to list COMPANY’s shares in Brazilian  stock exchanges, according to the rules of the New Market, and abroad; and  (iii) regulated the exercise of the voting right inherent to their  shares, the restriction on the circulation, the mutual relations as  controlling shareholders, and established the general principles to exercise  of the controlling power and management if COMPANY and its subsidiaries. |   |   |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|   |
| (b)    |   | the parties wish to amend the AGREEMENT  to (i) specify the new quantity of BOUND SHARES of each PARTY, and  update the table in sub-clause 3.1.; (ii) amend sub-clauses 1.1(c), 5.4,  8.9.6, 8.9.7, 8.10, 8.10.2, 8.12, 12.3, and 17.6; and (iii) add  sub-clauses 5.8.1, 8.9.2.1, and 17.7.1, of the AGREEMENT;                                                                                                                                                                                                                                                                                                                                                       |   |   |

Haveagreed to enter into this Amendment No. 1 to the Shareholders Agreement ofCPFL Energia S.A., former Draft II Participações S.A. (the “AMENDMENT”), asfollows:

Unlessas otherwise indicated, the other capitalized terms and expressions hereinshall have the same meanings attributed thereto in the text or in theAGREEMENT. 

**1.**     **CONFIRMATION ** 

 

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**1.1.**  Considering the increase of capital of COMPANY resolved inthe Extraordinary General Meeting (“AGE”) of August 6, 2002, and in compliance with the provision of sub-clause 3.1.2 of the AGREEMENT, the PARTIESdetermine, in the table below, which shall substitute the table contained insub-clause 3.1, the new quantity of shares bound to the agreement: 

|                                           |   |                       |              |                        |   |                      |       |       |   |   |       |       |
|------------------------------------------------|--------|----------------------------|-------------------|-----------------------------|--------|---------------------------|------------|------------|--------|--------|------------|------------|
| **PARTY**                                      |   | **NUMBER  OF COMMON**      |              | ** **                  |
| ** **                                     |   | **SHARES**                 |              | **PERCENTAGE**              |
| ** **                                     |   | ** **                 |              |                        |
| ** **                                     |   | ** **                 |              | **IN  THE ENTIRE**          |   | **IN  THE  CONTROL**      |
| ** **  
                        |   | ** **  
    |              | **CAPITAL**  
    |   | **BLOCK**  
    |
| VBC                                            |   |                       | 1,229,453,666     |                        |   |                      | 36.26      | %          |   |   | 45.32      | %          |
| 521                                            |   |                       | 1,030,872,091     |                        |   |                      | 30.40      | %          |   |   | 38.00      | %          |
| BONAIRE                                        |   |                       | 452,473,000       |                        |   |                      | 13.34      | %          |   |   | 16.68      | %          |
| **Total Shares**                               |   |                       | **2,712,798,757** |                        |   |                      | **80.00**  | **%**      |   |   | **100.00** | **%**      |
| ** **

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** ** |   |                       | ** **        |                        |   |                      | ** ** | ** ** |   |   | ** ** | ** ** |

 

 

| **1.2.** |   | The PARTIES hereby mutually agree to  (i) amend sub-clauses 1.1(c), 5.4, 8.9.6, 8.9.7, 8.10, 8.10.2, 8.12,  12.3, and 17.6; and (ii) add sub-clauses 5.8.1 and 8.9.2.1 and 17.7.1,  of the AGREEMENT; as follows: |
|----------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | (a) |   | sub-clause 1.1(c) shall be read as  follows: |
|--------|-----|--------|----------------------------------------------|

          “*(c) AGREEMENT– means this Shareholders Agreement.*”  

|   | (b) |   | sub-clause 5.4 shall be read as follows: |
|--------|-----|--------|------------------------------------------|

          *“5.4 A PREVIOUS MEETING shall be mandatory for all matters requiring the approval of the GeneralMeeting of COMPANY, its SUBSIDIARIES or ASSOCIATED COMPANIES, or those in whichthe Board of Directors of COMPANY or its SUBSIDIARIES can only resolve by thequalified majority (pursuant to sub-clause 7.4 of the AGREEMENT). Either PARTY,however, shall be entitled to require the holding of a PREVIOUS MEETING, calledaccording to sub-clause 5.2., to define the orientation of vote of therepresentatives of the PARTIES in the Board of Directors of COMPANY or itsSUBSIDIARIES, in relation to any other matter rather than those listed insub-clause 7.4 hereof. A PREVIOUS MEETING shall also be required for the Boardof Directors (of COMPANY and its SUBSIDIARIES) to resolve on the followingmatters:*  

                    *a)approval of the other members of the Staff of Officers, appointed by the ChiefExecutive Officer previously elected by the Board of Directors; and*  

                    *b)execution of agreement of any nature in a total amount higher than R$20 million, even if such agreement is related to the expenses set forth inthe ANNUAL BUDGET or in the 5-YEAR BUSINESS PLAN.*”  

|   | (c) |   | sub-clause 8.9.6 shall be read as  follows: |
|--------|-----|--------|---------------------------------------------|

          *“8.9.6*  *Any member of the Committee who may have, actual orpotential conflict of interests or which are related to a RELATED PARTY whosemain activities imply the**actual or potentialexistence of conflict of interests, with a certain matter to be examined by theCommittee, shall not participate in the Committee Meeting, in which such matteris analyzed. Notwithstanding, upon request of the Committee, the member insituation of conflict of interests may be called to provide specificinformation.”*  

 

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|   | (d) |   | sub-clause 8.9.7 shall be read as  follows: |
|--------|-----|--------|---------------------------------------------|

          *“8.9.7*  *The matters analyzed by each of the Committees shall besubject of reports and proposals, which do not bind the resolution of the Boardof Directors. They should be included in the reports and proposals mentionedabove, including, eventual dissidence, if so required by any of the members ofthe respective Committee, as well as the grounds for the dissidence.”*  

|   | (e) |   | sub-clause 8.10 shall be read as  follows: |
|--------|-----|--------|--------------------------------------------|

          *“8.10*  *EXECUTIVE BOARD – The Executive Board, chosen for a three(3) year term, shall be comprised of six (6) members, being one(1) Chief Executive Officer, one (1) Strategy Vice-President, one(1) Financial Vice-President (also responsible for Relations withInvestors), one (1) Vice-President Director of Power Management, one(1) Distribution Vice-President Director, and one (1) GenerationVice-President Director.”*  

|   | (f) |   | sub-clause 8.10.2 shall be read as  follows: |
|--------|-----|--------|----------------------------------------------|

          *“8.10.2*  *The Chief Executive Officer of COMPANY shall also act as suchin the SUBSIDIARIES, and shall be incumbent, according to item 8.10.1, tosubmit the names of the professionals who will shall fill in the other ExecutiveOfficers positions of the SUBSIDIARIES. The Power Vice-President Directors,Distribution and Generation Vice-President Directors shall be, respectively,the Superintendents (and main executives) of the SUBSIDIARIES by means of whichthe activities of power management, distribution and generation will shall beexercised.”*  

|   | (g) |   | sub-clause 8.12 shall be read as  follows: |
|--------|-----|--------|--------------------------------------------|

          *“8.12*  *During the period while the new Chief Executive Officer  isbeing selected, the Chairman of the Board of Directors shall take over asinterim Chief Executive Officer, or, if this is not possible, the FinancialVice-President Director shall take over.”*  

|   | (h) |   | sub-clause 12.3 shall be read as  follows: |
|--------|-----|--------|--------------------------------------------|
|   |

          *“12.3*  *In the case of 521 and BONAIRE, the corporate control ofwhich are held by Investment Funds – i.e., Fundo de Investimento em Ações BB Carteira Livre I and Fundo de Investimento Financeiro BB Renda Fixa IV(521) and Mellon Energia São Paulo Fundo de Investimento em Ações(BONAIRE) – the provisions of this clause shall apply to any change implyingthat a third party becomes the holder of the absolute majority of its quotas.The shareholding composition of 521 and BONAIRE and the composition of theInvestment Funds controlling same constitute attachments 1 and 2 hereof.”*  

|   | (i) |   | sub-clause 17.6 shall be read as  follows: |
|--------|-----|--------|--------------------------------------------|

 

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          *“17.6*  *All notices provided for herein shall be done in writing anddeemed actually given when transmitted by cable, facsimile or electronic datatransmission (in each case, subject to the receipt of the appropriate receiptcode or any receipt confirmation by the receiving PARTY) or when delivered byhand or sent by certified letter to the address of the PARTIES, as indicatedbelow:”*  

*................*  

*If to BONAIRE*  

*BONAIREPARTICIPAÇÕES S.A.,*  

*Attn.: CarlosEduardo Reich**Av. Almirante Barroso 52, 33o andar**CEP 20.031-000 — Rio de Janeiro — RJ**Phone: (21) 2510-9990**Fax: (21) 2510-9901**e-mail: carlosreich@mellonbrascan.com.br*  

*Attn.:Presidente da Fundação CESP**Alameda Santos, no 2.477**CEP 01419-907 – São Paulo — SP**Phone: (11) 3068-3221**Fax: (11) 3068-3051**e-mail: presidencia@funcesp.com.br*  

*Attn.:Presidente da PETROS — Fundação Petrobras de Seguridade Social**Rua do Ouvidor, no 98**CEP 20040-030 — Rio de Janeiro — RJ**Phone: (21) 2506-0577**Fax: (21) 2506-0510**e-mail: cflory@petros.com.br*  

Attn.: Presidente da Fundação SistelSEPS EQ 702/902, 2o andarCEP 70390-025 — Brasília — DFPhone: (61) 317-7242Fax: (61) 322-4475  

*e-mail: pimentel@sistel.com.br*”  

 

|   | (j) |   | added sub-clause 5.8.1, which shall be  read as follows: |
|--------|-----|--------|----------------------------------------------------------|

          “*5.8.1*  *Notwithstanding the provision in sub-clause 5.8 above, inthe resolutions made in PREVIOUS MEETINGS the PARTIES shall be bound to complywith the provisions of art. 115, Law 6.404/76, which provides for the abuse ofvoting right and conflict of interests.*”  

|   | (l) |   | added sub-clause 8.9.2.1, which shall be  read as follows: |
|--------|-----|--------|------------------------------------------------------------|

          “*8.9.2.1*  *Upon the request of either PARTY, substitute members shallalso be appointed by the Board of Directors for the Committees referred to insub-clause 8.9.2 above (PARTY entitled to appoint the first appointed memberalso being incumbent to appoint the respective substitute). The substitutemember shall substitute the first**appointed member inmeetings of the Committee, in which, by the tenor of the matter to be analyzed,the first appointed member has actual or potential conflict of interests, —because of the personal situation of the first appointed member, or by thatfact that s/he is bound to the RELATED PARTY, whose preponderant activitiesimply the actual or potential existence of conflict of interests with thematter submitted for the Committee. Staff individuals of VBC, BONAIRE, 521 orPrevi — Caixa de Previdência dos Funcionários do Banco do Brasil (in the caseof the latter including both its employees and that of the sponsors assignedthereto) may be appointed for the Committees – without any potential oreffective conflict of interests resulting therefrom—.*”  

 

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|   | (m) |   | added sub-clause 17.7.1, which shall be  read as follows: |
|--------|-----|--------|-----------------------------------------------------------|

          “*17.7.1.*  *The PARTIES shall be bound not to execute, except jointly,any other agreement of the same nature (agreement of vote) during theeffectiveness of this AGREEMENT.*”  

**1.3.**  Consideringthe change of name of the investments funds controlling BONAIRE, as reflectedin the new wording of sub-clause 12.3 approved in letter (h), item 1.2 above,Attachment 2 of the AGREEMENT is hereby adapted, and substituted for thedocument attached hereto. 

**2.**     **CONFIRMATION **

**2.1.**  All otherclauses and provisions of the Agreement that have not been expressly changedhereby shall remain unchanged and are hereby confirmed.

 

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**INWITNESS WHEREOF**, thePARTIES execute this Amendment in six (6) counterparts of equal contentand form, in the presence of the two undersigned witnesses.

São Paulo, August 27,2002.

VBC ENERGIA S.A.

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521 PARTICIPAÇÕESS.A.

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BONAIREPARTICIPAÇÕES S.A.

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CPFL ENERGIA S.A.

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Witnesses

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| Name:  IDENTIFICATION CARD (“RG”): |   |   |   | Name:  IDENTIFICATION CARD (“RG”): |

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**AMENDMENT No. 2 TO THE SHAREHOLDERSAGREEMENTOF CPFL ENERGIA S.A. (former Draft II Participações S.A.)**

By thisprivate instrument, the parties:

**VBC ENERGIA S.A**., a joint-stock corporation with offices in the cityof São Paulo, State of São Paulo, at Avenida Engenheiro Luís Carlos Berrini,No. 1297/1307, 13th floor, suite 132, enrolled with the NationalRegister of Legal Entities of the Ministry of Finance (“CNPJ/MF”) underNo. 00.095.147/0001-02, hereinafter simply referred to as “VBC”;

**521 PARTICIPAÇÕES S.A**., a joint-stock corporation with offices in the cityof Rio de Janeiro, State of Rio de Janeiro, at Praia de Botafogo, 501 — 4thfloor, enrolled with the National Register of Legal Entities of the Ministry ofFinance (“CNPJ/MF”) under No. 01.547.749/0001-16, hereinafter simplyreferred to as “521”;

**BONAIRE PARTICIPAÇÕES S.A**., a joint-stock corporation with offices in the cityof São Paulo, State of São Paulo, at Avenida Paulista, 37, 10thfloor - part occupancy, enrolled with the National Register of Legal Entitiesof the Ministry of Finance (“CNPJ/MF”) under No. 02.117.801/0001-67,hereinafter simply referred to as “BONAIRE”; and they may be individuallyreferred to as PARTY, or collectively PARTIES;

and, asIntervening Consenting Party,

**CPFL ENERGIA S.A.**, a joint-stock corporation with offices in the cityof São Paulo, State of São Paulo, at Rua Ramos Batista, 444, enrolled with theNational Register of Legal Entities of the Ministry of Finance (“CNPJ/MF”)under No. 02.429.144/0001-93, hereinafter simply referred to as “COMPANY”;the PARTIES and COMPANY being represented according to their respective bylaws;

WHEREAS:

| (a)    |   | The PARTIES, by means of the  Shareholders Agreement of COMPANY executed on March 22, 2002, and  amended on August 27, 2002 (the “AGREEMENT”) (i) were bound to increase  the capital of COMPANY; (ii) expressed their wish to list COMPANY’s  shares in Brazilian stock exchanges, according to the rules of the New  Market, and abroad; and (iii) regulated the exercise of the voting right  inherent to their shares, the restriction on the circulation, the mutual  relations as controlling shareholders, and established the general principles  to exercise of the controlling power and management if COMPANY and its  subsidiaries. |   |   |
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|   |
| (b)    |   | In a meeting held on October 20,  2003, the Board of Directors of CPFL ENERGIA resolved to increase the capital  of the company, subject to the limits of its authorized capital, from R$  3,390,998,447.00 to R$ 4,940,998,445.90, upon the issuance of 727,699,530 new  shares; and                                                                                                                                                                                                                                                                                                                                                                                            |   |   |
|   |
| (c)    |   | the PARTIES wish to amend the AGREEMENT  to (i) revoke clauses 3.1.1 and 3.1.2, by virtue of its compliance and  loss of object; and (ii) amend sub-clause 3.1., in order to specify the  new relation between the BOUND SHARES held by each of the PARTIES and their  respective shares in the capital of COMPANY;                                                                                                                                                                                                                                                                                                                                                         |   |   |

Haveagreed to enter into this Amendment # 2 to the Shareholders Agreement of CPFLEnergia S.A. (the “AMENDMENT”), as follows:

 

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Unless as otherwise indicated, the other capitalized terms and expressions herein shall have the same meanings attributed thereto in the text or in the AGREEMENT.

**1.  CORRECTION**

**1.1.**  The PARTIES have hereby mutually agreed to: (i) revoke sub-clauses 3.1.1 and 3.1.2 of the AGREEMENT; and (ii) amend sub-clause 3.1 of the AGREEMENT, which shall be read as follows:

*“3.1*  *The following SHARES of each PARTY are bound to the AGREEMENT, which comprise the participation percentage in the entire capital of COMPANY and in the CONTROL BLOCK, as shown in the table below:*

|                     |   |                     |            |                     |   |                    |    |   |   |   |         |    |
|--------------------------|--------|--------------------------|-----------------|--------------------------|--------|-------------------------|---------|--------|--------|--------|--------------|---------|
| **PARTY**                |   | **NUMBER OF COMMON**     |            | **PERCENTAGE**           |
|                     |   | **SHARES**               |            |                     |
|                     |   | **BOUND TO THE**         |            |                     |
|                     |   | **AGREEMENT**            |            |                     |
|                     |   |                     |            | **IN THE ENTIRE**        |   | **IN THE**              |
|                     |   |                     |            | **CAPITAL**              |   | **CONTROL**             |
| ** **  
  |   | ** **  
  |            | ** **  
  |   | **BLOCK**  
  |
| *VBC*                    |   |                     | *1,229,453,666* |                     |   |                    | *29.85* | *%*    |   |   | *45.32*      | *%*     |
| *521*                    |   |                     | *1,030,872,091* |                     |   |                    | *25.03* | *%*    |   |   | *38.00*      | *%*     |
| *BONAIRE*                |   |                     | *452,473,000*   |                     |   |                    | *10.99* | *%*    |   |   | *16.68*      | *%*     |
| ***Total Shares***       |   |                     | *2,712,798,757* |                     |   |                    | *65.87* | *%*    |   |   | ***100.00*** | ***%*** |

**2.**     **CONFIRMATION **

**2.1.**  All other clauses and provisions of the AGREEMENT that have not been expressly changed hereby shall remain unchanged and are hereby confirmed.

**IN WITNESS WHEREOF**, the PARTIES execute this Amendment in six (6) counterparts of equal tenor and form, in the presence of the two (2) undersigned witnesses.

São Paulo, November 5, 2003.

VBC ENERGIA S.A.

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521 PARTICIPAÇÕES S.A.

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| Name:Title    |   |   |   | Name:Title    |

 

 

 

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Continuation of the signatures of the Amendment # 2 tothe Shareholders Agreement of CPFL Energia S.A. executed on November 5,2003.

 

BONAIREPARTICIPAÇÕES S.A.

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| Name:  Title  |   |   |   | Name:  Title  |

CPFL ENERGIA S.A.

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| Name:  Title  |   |   |   | Name:  Title  |

Witnesses

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| Name:  IDENTIFICATION CARD (“RG”): |   |   |   | Name:  IDENTIFICATION CARD (“RG”): |

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**AMENDMENT No. 3 TO THE SHAREHOLDERSAGREEMENTOF CPFL ENERGIA S.A.**  **(formerDraft II Participações S.A.)**

By this private instrument,

**VBC ENERGIA S.A.**, a joint-stock corporation with its head office inthe city of São Paulo, State of São Paulo, at Avenida Engenheiro Luís CarlosBerrini, 1297/1307, 14th floor, suite 142, enrolled in the Corporate TaxpayersRegister of the Ministry of Finance (“CNPJ/MF”) under no 00.095.147/0001-02,herein represented in accordance with its bylaws, hereinafter simply referredto as “VBC”; 

**521 PARTICIPAÇÕES S.A.**, a joint-stock corporation with its head office inthe city of Rio de Janeiro, State of Rio de Janeiro, at Rua Senador Dantas no105, 37th floor, enrolled in the Corporate Taxpayers Register of the Ministryof Finance (“CNPJ/MF”) under no 01.547.749/0001-16, herein represented inaccordance with its bylaws, hereinafter simply referred to as “521”; 

**BONAIRE PARTICIPAÇÕES S.A.**, a joint-stock corporation with its head office inthe city of São Paulo, State of São Paulo, at R. Iguatemi no 192 , suite 243,enrolled in the Corporate Taxpayers Register of the Ministry of Finance(“CNPJ/MF”) under no 02.117.801/0001-67, herein represented in accordance withits bylaws, hereinafter simply referred to as “BONAIRE”; 

VBC, 521 and BONAIRE, hereinafter referred tocollectively as “PARTIES”, or individually as “PARTY”; 

And also, as Intervening Consenting Party,

**CPFL ENERGIA S.A.**, a joint-stock corporation with its head office inthe city of São Paulo, State of São Paulo, at Rua Gomes de Carvalho no 1510,suite 02, 14th floor, enrolled in the Corporate Taxpayers Register of theMinistry of Finance (“CNPJ/MF”) under n.o 02.429.144/0001-93,** **hereinrepresented in accordance with its bylaws, hereinafter simply referred to as “COMPANY”; 

**WHEREAS**: 

(a)    the PARTIES**,**by means of theCOMPANY's Shareholders Agreement, signed on March 22, 2002 and amended onAugust 27, 2002 (“1st AMENDMENT”) and November 5, 2003 (“2nd AMENDMENT”) (the “AGREEMENT”), regulated the exercise ofthe voting right inherent to their shares, the restriction on the circulation,the mutual relations as controlling shareholders and established the generalprinciples for the exercise of the controlling power and management of theCOMPANY, its SUBSIDIARIES and ASSOCIATED COMPANIES;

(b)   the PARTIES wish to amend subclause 3.1. ofthe AGREEMENT, as a result of the reverse split of shares of the COMPANY andthe processes of the merger of shares issued by Companhia Paulista de Força eLuz (“Paulista”), Companhia Piratininga de Força e Luz (“Piratininga”) and CPFLGeração de Energia S.A.(“CPFL G”);

(c)    the PARTIES wish to amend the compositionof the Board of Directors of the COMPANY, its SUBSIDIARIES and ASSOCIATEDCOMPANIES;

(d)   the PARTIES wish to amend the matterswhich, pursuant to the AGREEMENT, require the holding of PRIOR MEETINGS, whichprecede the General Meetings and the meetings of the Board of Directors of the COMPANY, its SUBSIDIARIES and ASSOCIATED COMPANIES;

 

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(e)    the PARTIES wish to amend the structure of the COMPANY's advisory committees, in accordance with the Corporate Governance Model approved by Board of Directors in a meeting held on September 27, 2006.

(f)    the PARTIES wish to amend subclause 17.6. of the AGREEMENT, in order to update the addresses for dispatch of communications to the PARTIES; and

(g)   the PARTIES are interested in amending the AGREEMENT to reflect the matters set forth above;

They herewith sign the Third Amendment to the Shareholders Agreement of CPFL Energia S.A. (“3rd AMENDMENT”), in accordance with the following clauses and conditions:

Unless otherwise indicated, the other capitalized terms and expressions in this 3rd AMENDMENT shall have the same meanings attributed thereto in the text or in the AGREEMENT.

**1.         RECTIFICATION**

**1.1.****           **The PARTIES, by mutual agreement, herewith resolve to amend subclause 3.1. of the AGREEMENT, which shall now read as follows:

 “*3.1.   The following SHARES of each PARTY are bound to the AGREEMENT, and comprise the participation percentage in the CONTROL BLOCK of the COMPANY, as shown in the table below:*

 

|             |              |           |
|------------------|-------------------|----------------|
|             | **NUMBER OF**     | **PERCENTAGE** |
| **PARTY**        | **COMMON SHARES** | **IN THE**     |
|             | **BOUND TO THE**  | **CONTROL**    |
|             | **AGREEMENT**     | **BLOCK**      |
| VBC              | 122,945,367       | 45.32%         |
| 521              | 103,087,209       | 38.00%         |
| BONAIRE          | 45,247,300        | 16.68%         |
| **Total Shares** | **271,279,876**   | 100.00%        |

 

**1.2.****           **The PARTIES herewith resolve to amend subclause 7.4. to exclude the following letters:

(g) issuance of subscription bonus within the limit of the authorized capital;

(r) details of the matters to be submitted to previous analysis of each of the Committees, as provided for in sub-clause 8.9.4; and 

(s) compensation of the members of the Committees (sub-clause 8.9.2) that are not part of the COMPANY staff;

1.2.1. The PARTIES herewith resolve to amend the wording of items (i) and (m) of clause 7.4, which shall come into effect with the following new wording:

 

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 “(i) execution of an agreement of anynature of a total amount higher than R$ 20 million, unless the agreementin question is foreseen in the ANNUAL BUDGET;”

 “(m) selection and substitution of the COMPANY’sindependent accountants, if the company selected is not regarded as first classand does not have international operations;”

As a result of the above amendment, the other lettersof the above-mentioned subclause 7.4 were renamed.

**1.3.     **In view of the change in the composition of the Boardof Directors of the COMPANY, the PARTIES resolve to amend subclauses 8.2. and8.2.1, 8.2.1.1., 8.2.2. and 8.7. of the AGREEMENT, which shall now read asfollows:

* “8.2. BOARD OF DIRECTORS – The Board of Directors ofthe COMPANY shall be comprised of at least 7 (seven) members and a maximum of 9(nine) members, one of whom will be the Chairman, elected for a mandate of one01 (one) year, who may be reelected.”*

* “8.2.1.            The PARTIES shall elect, jointly,6 (six) members for the Board of Directors (except under the circumstancesdealt with in subclause 8.2.2.1 below). The number of members of the Board ofDirectors that each PARTY is entitled to appoint shall be in accordance withthe participation of the PARTIES in the CONTROL BLOCK, it being incumbent on:*

*a)         VBC, to appoint 3 (three) members;*

*b)         521, to appoint 2 (two) members;*

*c)         BONAIRE, to appoint 1 (one) member.*

*8.2.1.1 The number of members of the Board ofDirectors that each PARTY is entitled to appoint, pursuant to subclause 8.2.1above, takes into account the current participation of the PARTIES in theCONTROL BLOCK. In the event of amendment of the participation of any of thePARTIES in the total BOUND SHARES, the number of Board Members that the PARTYin question will be entitled to appoint shall be adapted to reflect thischange, however, the number of Board Members that the PARTY whose relativeinterest in the total BOUND SHARES has not changed shall remain unaltered.”*

*“8.2.2. If the minority shareholders, exercising therights granted to them under art. 141 main clause and 141, §§ 4 and 5, of Law6.404/76, elect one member to the Board of Directors, who, pursuant to theBOVESPA (Stock Exchange of the State of São Paulo) New Market Regulations,meets the requirements for classification as an independent board member and isdesignation as such, VBC, 521 and BONAIRE shall abstain from proposing to theGeneral Meeting a name or names that meet this definition.*

*8.2.2.1 If the situation described in subclause 8.2.2does not arise, in order to comply with the definition of independent boardmember, pursuant to the BOVESPA New Market regulations, VBC, 521 and Bonaire,by mutual agreement, shall propose to the General Meeting, (a) a name or namesthat meet this definition.*

*"8.7. The meetings of the Board of Directors of theCOMPANY shall be held at least once every month,  and may, however, be heldmore frequently, should the Chairman of the Board of Directors so request, onhis own initiative or at the request of any member of the Board of Directors.The meetings of the Board of Directors shall be called 9 (nine) days inadvance, by notice sent by the Chairman of the Board, indicating the matters tobe discussed and**accompanied by any necessarysupporting documentation. The presence of all members shall allow the meetingsof the Board of Directors to be held irrespectively of a call notice."*

 

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**1.4.**      ThePARTIES herewith resolve to change the structure of COMPANY's advisoryCommittees, and therefore amend subclauses 8.9., 8.9.1., 8.9.2., 8.9.3.,8.9.4., 8.9.5., 8.9.6. and 8.9.7 of the AGREEMENT, and add subclauses 8.9.1.2.,8.9.1.3., 8.9.2.1., 8.9.2.2. and 8.9.7.1. to that document which shall comeinto effect with the following wording:

* “8.9.  **Committees **The Board of Directors, inthe resolutions covering the activities both of the COMPANY and itsSUBSIDIARIES or ASSOCIATED COMPANIES, shall be assisted by 3 (three)Committees, as follows: (a) Management Processes; (b) Human ResourcesManagement; and (c) Related Parties.”*

* “8.9.1.            The Human Resources Management Committeeshall be permanent, meeting at least once every half-year, with one meeting inFebruary and another in July.  The  Management Processes and Related PartiesCommittees shall not be permanent and shall meet at the request of the Board ofDirectors, whenever it is necessary to analyze and state an opinion on thematters under their jurisdiction, in accordance with the internal regulationslaid down in subclause 8.9.4 it being understood that, if the matters relate totransactions involving RELATED PARTIES, the Board of Directors must call thecompetent Committee to consider them.”*

* “8.9.1.2.         The Related Parties and ManagementProcesses Committees shall be called by notice from the Secretary of the Boardof Directors, who shall forward to the Committee in question, prior todiscussion by the Board of Directors, the matters to be considered by theBoard, with the knowledge of the Chairman of the Board of Directors and of the ChiefExecutive Officer of the COMPANY.”*

* “8.9.1.3.         The meetings of the Committeesshall only be held with the presence of all their members. Any member who isunable to attend shall advise the Secretary of the Board, prior to the date ofthe meeting, the name of his substitute, who will represent him only at thatmeeting. The Secretary shall inform the other members about his absence and thename of the substitute.”*

* “8.9.2.            The Management Processes andRelated Parties Committees shall each be comprised of 3 (three) members, and atleast 01 (one) member of each Committee should be a standing or alternatemember of the Board of Directors of the COMPANY. The Human Resources ManagementCommittee shall be comprised of 3 (three) members, should all be standing oralternate members of the Board of Directors of CPFL.*

* “8.9.2.1.         It will be incumbent on VBC, 521and BONAIRE to nominate one member each, for each of the Committees mentionedin clause 8.9., for subsequent appointment by the Board of Directors of theCOMPANY. The members of the Committees shall have a mandate of 1 (one) year, asfrom the date of their appointment, and may be reappointed.”*

* “8.9.2.2.         The members of the Committees shallnot have alternates bound to them, and each member may invite only onespecialist to assist them in the specific work, by prior agreement of the othermembers. Proposals for the participation of specialists shall be forwarded viathe Secretary of the Board, and the specialists shall not be consideredpermanent members of the Committees in question.”*

* “8.9.2.3.         The Meetings of the ManagementProcesses and Related Parties Committees shall only be installed with thepresence of their 3 (three) members; if there is no quorum for installation ofthe meeting, a new call shall be made with at least 2 (two) days notice.*

 

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*8.9.2.4.            After being*  *installed *  *with the presence ofits 3 (three) members, the Related Parties Committee may validly decide by thevote of only 2 (two) of its members if the matter to be discussed relates toone of the shareholders VBC, 521 and BONAIRE, and the undecided member (themember that has been appointed by the undecided shareholder) shall not takepart in the decision."*

* “8.9.3.            In the first meeting held afterthe appointment of members of the Committees by the Board of Directors, 1 (one)Coordinator shall be chosen for each committee, by consensus of all itsmembers, who shall necessarily be a standing or alternate member of the Boardof Directors of the COMPANY.”*

* “8.9.4*              *The details of the matters to besubmitted for the prior analysis of each of the Committees shall be definedinternally, duly approved by the Board of Directors, it being established,however that it will be incumbent on.”*

a)                 the ManagementProcesses Committee: to assure the quality of the information received by theBoard of Directors; to submit proposals for improvement in the ManagementProcesses of the COMPANY, its Subsidiaries and Associated Companies; to assessthe main critical and risk areas for the business of the COMPANY, its Subsidiariesand Associated Companies; to direct the internal audit processes, preparingproposals for improvement and supervising their execution internally;

b)                the Human ResourcesManagement Committee: to define the performance targets for assessment of theExecutive Board; to conduct the appraisal of the Executive Board; to define theremuneration criteria of the Executive Board, including short and long termincentive plans; to prepare and conduct the succession plan of the ExecutiveBoard; to coordinate the process of choice of the COMPANY's Chief ExecutiveOfficer; to approve the officers appointed by the Chief Executive Officer ofthe COMPANY to join the Executive Board; to monitor execution of the COMPANY'shuman resources policies and practices, preparing proposals for improvement;

c)                 Related Parties Committee:to assess the process of selection of suppliers and service providers to carryout works, for acquisition of consumables and services where the contractamount is equal to or greater than the minimum amount in the jurisdiction ofthe Board of Directors, pursuant to the COMPANY's bylaws, for contracts thatinvolve RELATED PARTY (PARTIES), issuing an opinion as to the best offer; tomonitor closing of new power energy sales contracts where the contract amountis equal to or greater than the minimum amount in the jurisdiction of the Boardof Directors, pursuant to the COMPANY's bylaws, for contracts that involveRELATED PARTY (PARTIES), ensuring that market conditions are observed; toanalyze the operation that might, in any way, result in benefit or advantage,of any kind, to a RELATED PARTY.

* “8.9.5.            Any member of the Committees whoeffectively or potentially has conflicts of interest with a certain mattershall withdraw from the room and shall not participate in the meeting duringthe period in which the matter is being considered, but may be invited toprovide information.”*

* “8.9.6.            The matters analyzed by each ofthe Committees shall be the subject of reports and/or proposals to the Board ofDirectors.  The Report and/or Proposals forwarded to the Board of**Directors do not bind the decision Board Members, andsuch reports and/or proposals shall report any disagreements and the groundsfor such disagreements.”*

 

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* “8.9.7.            In addition to the activitiesperformed by the Committees, the Board of Directors may, when necessary, set upWork Commissions to supervise the study and conducting of matters of greatrelevance for the COMPANY.”*

* “8.9.7.1.         The Work Commissions will betemporary, shall be established for a specific purpose and must be coordinatedby a member of the COMPANY's Board of Directors.  The other members of the WorkCommissions, the number of whom it shall be decided by the Board of Directorsat the time of setting up each Work Commission, shall be representatives of theshareholders, and each member may invite only one additional member to assistthem in conducting the specific work.*” 

**1.5.**      ThePARTIES herewith resolve to amend subclause 9.1. and add subclauses 9.1.1.,9.1.2 and 9.4., which shall come into effect with the following wording:

* “9.1.   The composition, operation and resolutions ofthe Board of Directors and Executive Officers of the SUBSIDIARIES shall observethe provisions set forth in this AGREEMENT, and the statutory directors of theCOMPANY shall be elected to join the Board of Directors of the SUBSIDIARIES.”*

* “9.1.1.            With regard, specifically, to theBoards of Directors of Companhia Paulista de Força e Luz, Companhia Piratiningade Força e Luz, CPFL Geração de Energia S.A. and Rio Grande Energia S.A., foras long as these, pursuant to art. 138 §2, of Law 6.404/76 continue to bepublicly quoted corporations, they will be comprised of 3 (three) members, inbeing incumbent on:*

*a)         the COMPANY, to appoint 2 (two) members,who should be statutory directors of the COMPANY; and*

*b)         the employees of Companhia Paulista deForça e Luz, Companhia Piratininga de Força e Luz, CPFL Geração de Energia S.A.and Rio Grande Energia S.A., to appoint 1 (one) member, in accordance with thepertinent provisions of the bylaws”.*

* “9.4.   It is a prior condition for election as theCOMPANY representative on the Board of Directors of SUBSIDIARIES and ASSOCIATEDCOMPANIES that the person appointed sign a term of concurrence with thisAGREEMENT, in which (i) he declares that he is fully aware of its content andundertakes to fulfill it, especially in respect of the obligation of uniformblock vote as decided in the PRIOR MEETINGS.”*

**1.6.**      ThePARTIES herewith resolve to add subclauses 10.3., 10.3.1. and 10.3.2, whichshall come into effect with the following wording:

* “10.3. The number of members of the Audit Committeethat each PARTY is entitled to appoint shall be in accordance with theparticipation of the PARTIES in the CONTROL BLOCK, it being incumbent on:*

*a)         VBC, to appoint 2 (two) members;*

*b)         521, to appoint 2 (two) members;*

*c)         BONAIRE, to appoint 1 (one) member.*

 

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*10.3.1 The number of members of the AuditCommittee**** ****that each PARTY is entitled to appoint, pursuant to subclause10.3 above, takes into account the current participation of the PARTIES in theCONTROL BLOCK. In the event of amendment of the participation of any of thePARTIES in the total BOUND SHARES, the number of Audit Committee**** ****membersthat the PARTY in question will be entitled to appoint shall be adapted toreflect this change, however, the number of Audit Committee**** ****members thatthe PARTY whose relative interest in the total BOUND SHARES has not changedshall remain unaltered.*  

*10.3.2  If the minority shareholders, exercising therights granted to them under art. 161, § 4 (a) of Law 6.404/76:*

*- elect one member of the Audit Committee, VBC, 521and BONAIRE shall each appoint one member and VBC and 521, by mutual agreement,shall appoint the other member;*

*- elect two members of the Audit Committee, VBC and521 shall each appoint one member and VBC, 521 and Bonaire, by mutualagreement, shall appoint the other member.”*

**1.7.**      ThePARTIES herewith resolve to amend subclause 17.6., which shall come into effectwith the following wording:

* “17.6. All notices provided for in this AGREEMENTshall be made in writing and deemed to have been made when transmitted bycable, facsimile or electronic data transmission (in each case, subject to thereceipt of the appropriate receipt code or any receipt confirmation by thereceiving PARTY) or when delivered by carrier against a receipt slip or sent byregistered letter to the address of the PARTIES, as indicated below:*

*If to VBC*

*VBC Energia S.A.*

*Avenida Engenheiro Luís Carlos Berrini no 1297/1307,14o andar, conj.142*

*CEP 04571-010, Brooklin - São Paulo, SP*

*Attn.: Luiz Aníbal de Lima Fernandes (DirectorSuperintendent)*

*Phone: (11) 5102.7050*

*Fax: (11) 5505.9161*

*E-mail: lalfernandes@vbcenergia.com.br*

*Attn.:  Nelson Koichi Shimada (FinanceDirector)*

*Phone: (11) 5102.7050*

*Fax: (11) 5505.9161*

*E-mail:nelson.shimada@vpar.com.br*

*If to 521*

*521 Participações S.A.*

*Rua Senador Dantas no 105, 37o andar*

*20031-204 Rio de Janeiro, RJ*

*Attn.: José Ricardo do Carmo*

*Phone: (21) 3808-3211*

*Fax: (21) 3808-3193*

*E-mail:521@521participacoes.com.br*

*Caixa de Previdência dos Funcionários do Banco doBrasil – PREVI*

***Diretoria de Participações***

*Praia de Botafogo no 501, 4o andar*

*22250-040 Rio de Janeiro, RJ*

 

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*Phone: (21) 3870-1006*

*Fax: (21) 3870-1951*

*E-mail:dipar@previ.com.br and gepar3@previ.com.br*

*If to BONAIRE*

*BONAIRE PARTICIPAÇÕES S.A.*

*Attn.: Carlos Eduardo Reich*

*Av. President Wilson, 231 - 11o andar*

*CEP 20030-021, Centro - Rio de Janeiro, RJ*

*Phone: (21) 3974-4540*

*Fax: (21) 3974-4501*

*E-mail:carlosreich@bnymellon.com.br*

*Attn.:****President of Fundação CESP***

*Mr. Martin Roberto Glogowsky*

*Al. Santos, 2477 - 10o andar*

*CEP 01419-907 - São Paulo, SP*

*Phone: (11) 3068-3100*

*Fax: (11) 3068-3049*

*E-mail:martin.glogowsky@funcesp.com.br*

*Attn.:****President of PETROS****– Fundação Petrobrásde Seguridade Social*

*Mr. Wagner Pinheiro de Oliveira*

*Rua do Ouvidor, 98 - 8o andar*

*CEP 20040-030, Centro - Rio de Janeiro, RJ*

*Phone: (21) 2506-0577*

*Fax: (21) 2506-0570*

*E-mail:presidencia@petros.com.br*

*Attn.:****President of Fundação SISTEL***

*Mr. Wilson Carlos Duarte Delfino*

*SEPS EQ 702/902 - 1o andar*

*CEP 70390-025 - Brasília - DF*

*Phone: (61) 3317-7242*

*Fax: (61) 3317-7109*

*E-mail:**delfino@sistel.com.br *

**1.7.    **Considering theamendments made to the text of the AGREEMENT, as well as those set forth in theprevious items, the PARTIES resolve to consolidate the Shareholders Agreementof the COMPANY, which is attached to this Amendment.

**2.         CONFIRMATION**

Allother clauses and provisions of the AGREEMENT that have not been expresslychanged by this 3rd AMENDMENT are hereby confirmed.

And,being in agreement, the PARTIES sign this 3rd AMENDMENT in 4 (four) counterparts ofequal tenor and form, in the presence of the two undersigned witnesses.

SãoPaulo, December 6, 2007

 

 

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**VBC ENERGIA S.A.**

| ______________________________

Name:

Title: | ______________________________

Name:

Title: |
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**521 PARTICIPAÇÕES S.A.**

| ______________________________

Name:

Title: | ______________________________

Name:

Title: |
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**BONAIRE PARTICIPAÇÕES S.A.**

| ______________________________

Name:

Title: | ______________________________

Name:

Title: |
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**CPFL ENERGIA S.A.**

| ______________________________

Name:

Title: | ______________________________

Name:

Title: |
|-----------------------------------------------|-----------------------------------------------|

 

**Witnesses:**

| ______________________________

Name:

CPF: | ______________________________

Name:

CPF: |
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