##### Table of Contents



Registration No. 333-131872
    UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form S-4/A
 Amendment No. 1
to
Registration Statement
under
the Securities Act of 1933
 
 AVA FORMATION CORP.
  Washington
(State or other jurisdiction of
incorporation or organization)
    
    4931
(Primary Standard Industrial
Classification Code Number)
    
    20-4296099
(I.R.S. Employer
Identification No.)1411 East Mission Avenue
Spokane, Washington 99202
(509) 489-0500
(Address, including zip code, and telephone number, including
area code, of Registrants principal executive offices)MARIAN M. DURKIN
Senior Vice President and
General Counsel
Avista Corporation
1411 East Mission Avenue
Spokane, Washington 99202
(509) 489-0500
    
    
    
    J. ANTHONY TERRELL
Dewey Ballantine LLP
1301 Avenue of the
Americas
New York, New York 10019
(212) 259-8000




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Prompt execution of the enclosed proxy will save the expense of an additional mailing.
Your immediate attention is appreciated.
 
    Date:
    
    Thursday Morning, May 11, 2006
    
    Place:
    
    Avista Main Office BuildingTime:
    
    9:15 a.m. Doors Open
    
    
    
    Auditorium9:30 a.m. Refreshments
    
    
    
    1411 E. Mission Avenue10:00 a.m. Annual Meeting Convenes
    
    
    
    Spokane, Washington
     The Board of Directors and management believe that the formation of a holding company is in the
best interest of the shareholders and unanimously recommend approval of the holding company
proposal and urge you to vote FOR the proposal.




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##### Table of Contents



Gary G. Ely
 
 
 If you require special accommodations at the Annual Meeting due to a disability, please call our
Investor Relations Department by April 21.




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AVISTA
1411 East Mission Avenue
Spokane, Washington 99202
 
  
 Date:
    
    Thursday, May 11, 2006Time:
    
    10:00 a.m., Pacific TimePlace:
    
    Avista Main Office BuildingAuditorium1411 E. Mission AvenueSpokane, WashingtonRecord Date:
    
    March 10, 2006Meeting Agenda:
    
    
    1
    )
    
    Election of four (4) directors;2
    )
    
    Approval of the formation of a holding company
by means of a statutory share exchange whereby each outstanding share
of Avista Corporation common stock would be exchanged for one share of
common stock of a new corporation, currently named AVA Formation
Corp.3⁄4 as a result, holders of Avista common stock would become
holders of AVA common stock and Avista would become a subsidiary of AVA;3
    )
    
    Ratification of the appointment of Deloitte &
Touche LLP as the Companys independent registered public accounting
firm for the fiscal year ending December 31, 2006;4
    )
    
    Transaction of other business that may come before the meeting or any adjournment(s).




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##### Table of Contents



of
  
  of
  relating to
  
 
  
 
  
 
 
 
 
  
 
 This Proxy Statement-Prospectus provides detailed information about the formation of a holding
company. You should read it carefully. If the holding company formation is approved and becomes
effective, your shares of Avista common stock will be exchanged for AVA common shares.




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The proposed formation of the holding company involves risks. See Risk Factors, beginning on
page 11 of this Proxy Statement-Prospectus.
 
  
 Neither the Securities and Exchange Commission nor any other regulatory body has approved or
disapproved of these securities or passed upon the accuracy or adequacy of this Proxy
Statement-Prospectus. Any representation to the contrary is a criminal offense.




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SUMMARY
    
    
    3RISK FACTORS
    
    
    11ADDITIONAL INFORMATION ABOUT AVISTA AND AVA
    
    
    12VOTING PROCEDURES
    
    
    14General
    
    
    14Voting Rights; Votes Required
    
    
    14Adjournment
    
    
    14PROPOSAL 1 ELECTION OF DIRECTORS
    
    
    16General
    
    
    16Nominees and Continuing Directors
    
    
    16Corporate Governance Matters
    
    
    19Director Independence
    
    
    19Board Meetings
    
    
    20Committees
    
    
    20Meetings of Independent Directors
    
    
    21Corporate Governance Guidelines
    
    
    21Code of Business Conduct and Ethics
    
    
    21Information on Company Website
    
    
    21Communications With Directors
    
    
    21Director Nominations
    
    
    22Process For Selecting Board Candidates
    
    
    22Audit Committee Report
    
    
    23Director and Executive Compensation
    
    
    24Director Compensation
    
    
    24Compensation & Organization Committee Report
    
    
    26Compensation Committee Interlocks and Insider Participation
    
    
    30Summary Compensation Table
    
    
    31Aggregated Option Exercises
    
    
    32Long-Term Incentive Plan Awards
    
    
    32Pension Plan Table
    
    
    33Change of Control Agreements and Other Compensatory Plans
    
    
    34Performance Graph
    
    
    36Section 16(a) Beneficial Ownership Reporting Compliance
    
    
    37Class Action Securities Litigation
    
    
    37PROPOSAL 2 HOLDING COMPANY PROPOSAL
    
    
    38General
    
    
    38Background
    
    
    38Corporate Reorganization
    
    
    39Reasons for Holding Company Proposal
    
    
    40Potential Negative Consequences
    
    
    42Plan of Exchange
    
    
    42Required Shareholder Approval
    
    
    42Required Regulatory Approvals
    
    
    42
 
 i




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Regulation of AVA
    
    
    43Business of AVA
    
    
    44Amendment or Termination of Plan of Exchange
    
    
    44Effective Time of Share Exchange; Conditions
    
    
    44Notice of Effectiveness of Share Exchange
    
    
    45Exchange of Stock Certificates Not Required
    
    
    45Material United States Income Tax Consequences
    
    
    45Description of AVA Common Stock; Comparative Shareholder Rights
    
    
    46Certain Attributes of Avista Common Stock
    
    
    51Listing of AVA Common Stock
    
    
    53Dividends
    
    
    54Directors and Management of AVA
    
    
    54Change of Control and Other Agreements
    
    
    55Executive Compensation and Employee Benefit Plans
    
    
    55Transfer Agent and Registrar
    
    
    56Market Price of Avista Common Stock
    
    
    56Validity of AVA Common Stock
    
    
    56Experts
    
    
    56Rights of Dissent
    
    
    56PROPOSAL 3 RATIFICATION OF APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    60SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
    
    
    61ANNUAL REPORT AND FINANCIAL STATEMENTS
    
    
    63OTHER BUSINESS
    
    
    632007 ANNUAL MEETING OF SHAREHOLDERS
    
    
    63EXPENSE OF SOLICITATION
    
    
    64APPENDIX I  NYSE REQUIREMENTS FOR DIRECTOR INDEPENDENCEAVISTA CORP. CATEGORICAL STANDARDSEXHIBIT
A  PLAN OF SHARE EXCHANGEEXHIBIT
B  AMENDED AND RESTATED ARTICLES OF INCORPORATION OF AVAEXHIBIT
C  AMENDED AND RESTATED BYLAWS OF AVAEXHIBIT
D  DISSENTERS RIGHTSEXHIBIT 23(B)EXHIBIT 99(A)EXHIBIT 99(B)
  
 ii




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SUMMARY
 
 This summary is presented solely to furnish limited introductory information regarding Avista
Corporation and the matters to be considered at Avistas 2006 Annual Meeting of Shareholders. The
following information has been selected from the more detailed information contained or
incorporated by reference in this Proxy Statement-Prospectus. Shareholders should read the entire
Proxy Statement-Prospectus, including exhibits, and the Incorporated Documents before casting their
votes. Proxies executed by shareholders may be revoked at any time prior to the Annual Meeting.
 
 Certain terms used throughout this Proxy Statement-Prospectus are defined below under Certain
Defined Terms.
 PROPOSAL 1
 ELECTION OF DIRECTORS
 Proposal 1  Election of Directors
 Proposal 2Holding Company Proposal
 The Board of Directors recommends a vote FOR each nominee for director.
 PROPOSAL 2
 HOLDING COMPANY PROPOSAL
 AVA and Avista
 3




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Proposed Holding Company Structure
  Proposal 2Holding Company Proposal
 
 
 Charts showing the corporate structure and ownership of Avista and its affiliates before and after
the Effective Time of the Share Exchange, and after the Avista Capital Dividend, are presented
below.
 
 
 Prior to the Effective Time of the Share Exchange:
 
 
 
 
 (1)
    
    Avista Utilities is a business segment of Avista Corporation.(2)
    
    Avista Energy and Avista Power comprise the Energy Trading and Resource Management business
segment of Avista Corporation.(3)
    
    Avista Advantage is a business segment of Avista Corporation.(4)
    
    Other is a business segment of Avista Corporation.
 4




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After the Effective Time of the Share Exchange and Prior to the Avista Capital Dividend:
 
 
 
 
 (1)
    
    Avista Utilities will be a business segment of Avista Corporation.(2)
    
    Avista Energy and Avista Power will comprise the Energy Trading and Resource Management
business segment of Avista Corporation.(3)
    
    Avista Advantage will be a business segment of Avista Corporation.(4)
    
    Other will a business segment of Avista Corporation.
 5    Table of Contents  After the Avista Capital Dividend:
 
 
 
 
 (1)
    
    Avista Utilities, Inc. will be a business segment of Avista Formation Corp.(2)
    
    Avista Energy and Avista Power will comprise the Energy Trading and Resource Management
business segment of AVA Formation Corp.(3)
    
    Avista Advantage will be a business segment of AVA Formation Corp.(4)
    
    Other will be a business segment of AVA Formation Corp.
 6




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Reasons for the Holding Company Proposal
 Proposal 2Holding Company
Proposal
 Required Vote
  Required Regulatory Approvals
 
 Proposal 2Holding Company Proposal
 
 Effectiveness
 Proposal 2Holding Company Proposal
 Exchange of Stock Certificates Not Required
 Proposal 2Holding Company Proposal
 Material United States Income Tax Consequences to Shareholders
 Proposal 2Holding
Company Proposal
 AVA Capital Stock; Rights of AVA Shareholders
 7




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
    
    amendments to the provisions of Avistas articles of incorporation relating to
(a) calling special meetings of shareholders, (b) the number, tenure, vacancy,
classification, nomination or removal of directors or (c) adoption, amendment or
repeal of Avistas Bylaws require 80% shareholder approval, whereas similar
amendments to AVAs articles will require only
66-2/3% shareholder approval;
    
    amendments to the provisions of Avistas Bylaws relating to matters described in
clause (a) or (b) above require 80% shareholder approval, whereas similar
amendments to AVAs Bylaws will require only 66-2/3% shareholder approval;
    
    Avistas articles of incorporation contain a fair price provision which limits
the ability to enter into certain business combination transactions with an
Interested Shareholder, whereas AVAs articles of incorporation will contain no
such provision; and
    
    Avista has a shareholder rights plan, whereas AVA will not have such a plan at
the Effective Time of the Share Exchange, although AVAs Board of Directors may
consider whether or not to adopt such a plan after the Effective Time.
 
 
 Proposal 2Holding Company Proposal
 
 Stock Exchange Listing
 Proposal 2Holding Company Proposal
 Dividends
  Proposal 2Holding Company
Proposal
 Directors and Management of AVA
 Proposal 2Holding Company Proposal
 8




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Selected Avista Financial Information
 As of, or for the year ended,December 31,2003
    
    2004
    
    2005(unaudited)Earnings per common share from continuing operations, basic
    
    $
    1.03
    
    
    $
    0.74
    
    
    $
    0.93Earnings per common share from continuing operations,
diluted
    
    
    1.02
    
    
    
    0.73
    
    
    
    0.92Dividends paid per share
    
    
    0.490
    
    
    
    0.515
    
    
    
    0.545Book value per common share
    
    
    15.54
    
    
    
    15.54
    
    
    
    15.87
 Market Price of Avista Common Stock
  Rights of Dissent
 Proposal 2Holding Company Proposal
 Risk Factors
 Risk
Factors
 The Board of Directors recommends approval and adoption of the Holding Company Proposal and urges
each shareholder to vote FOR the Holding Company Proposal.
 PROPOSAL 3
 RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 Proposal 3Ratification of Appointment of Independent Registered Public Accounting
Firm
 The Board of Directors recommends a vote FOR the proposal to ratify the appointment of Deloitte
as Avistas independent registered public accounting firm for continuing audit work in 2006.
 9




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CERTAIN DEFINED TERMS
  AVA
 AVA Common Stock
 Avista Avista Corp Company
 Avista 2005 10-K
 Avista Capital Dividend Proposal 2Holding Company Proposal
 Avista Common Stock
 Avista Utilities
 Effective Time
 Plan of Exchange
 Share Exchange Proposal 2Holding Company Proposal
 10




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RISK FACTORS
 
 
 
 If the holding company proposal were approved and the Share Exchange consummated, AVAs ability to
pay dividends on AVA Common Stock would be subject to the prior rights of holders of AVA
indebtedness and preferred stock and, further, would be dependent on the receipt of dividends and
other payments from AVAs subsidiaries.
 
 
  
 
  
 
  
 
    
    their results of operations, cash flows and financial condition, as well as the
success of their business strategies and general economic and competitive conditions;
    
    the prior rights of holders of existing and future debt securities and preferred
stock issued by those companies; and
    
    any applicable legal restrictions.
 
  
 
  
 
 
 11




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ADDITIONAL INFORMATION ABOUT AVISTA AND AVA
 General
    Incorporation of Documents by Reference
  
    
    Avistas Annual Report on Form 10-K for the year ended December 31, 2005 (the
Avista 2005 Form 10-K);
    
    Current Reports on Form 8-K, filed on January 10, 2006 and February 14, 2006; and
    
    all other documents filed by Avista with the SEC pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the filing of such Annual Report and
prior to the termination of the offering made by this Proxy Statement-Prospectus,
  
 12




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Please contact Avista no later than April 14, 2006 in order to receive timely delivery of the
Incorporated Documents before the Annual Meeting.
 Forward-Looking Statements
    
 13




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VOTING PROCEDURES
 
 General
 Your vote is important. Whether or not you plan to attend the annual meeting in person, we urge you
to vote and submit your proxy by mail, telephone or the Internet as promptly as possible.
 
  
 
 Voting Rights; Votes Required
   i.e.
  
 
 Adjournment
  
 14




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15




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PROPOSAL 1
 ELECTION OF DIRECTORS
 
 General
 
  
 
 Nominees and Continuing Directors
  * Indicates Nominees for Election
 ERIK J. ANDERSON
    
    Director since 2000 (Current term expires in 2007)
 
  
 KRISTIANNE BLAKE
    
    Director since 2000 (Current term expires in 2007)
 
  
 16




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ROY LEWIS EIGUREN
    
    Director since 2002 (Current term expires in 2008)
  
  
 GARY G. ELY
    
    Director since 2001 (Current term expires in 2008)
  JACK W. GUSTAVEL
    
    Director since 2003 (Current term expires in 2007)
 
  
 17




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JOHN F. KELLY*
    
    Director since 1997 (For a term expiring in 2009)
 
  
 JESSIE J. KNIGHT, JR.
    
    Director since 1999 (Current term expires in 2008)
 
  
 MICHAEL L. NOËL
    
    Director since 2004 (Current term expires in 2007)
  LURA J. POWELL, Ph.D.*
    
    Director since 2003 (For a term expiring in 2008)
 
  
 18




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HEIDI B. STANLEY*
    
    Director Nominee (For a term expiring in 2009)
 
  
 
  
 R. JOHN TAYLOR*
    
    Director since 1985 (For a term expiring in 2009)
 
  
 The Board of Directors recommends a vote FOR each nominee for director
 
 Corporate Governance Matters
 
 Director Independence
     19




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Board Meetings
  
 Committees
 Audit Committee
 Corporate Governance/Nominating Committee (Governance Committee)
 Compensation & Organization Committee (Compensation Committee)
 Finance Committee
 20




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Environmental, Safety & Security Committee (Environmental Committee)
 Executive Committee
 
 Meetings of Independent Directors
 
  
 
 Corporate Governance Guidelines
  
 Code of Business Conduct and Ethics
  
 Information on Company Website
  
 Communications With Directors
  21




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Director Nominations
  
    
    Shareholders may nominate one or more persons for election as directors at a meeting only if written notice of such
shareholders intent to make such nomination or nominations has been given, either by personal delivery or by United
States mail, postage prepaid, to the Corporate Secretary no later than (i) with respect to an election to be held at an
Annual Meeting of Shareholders, ninety (90) days in advance of such meeting and (ii) with respect to an election to be
held at a special meeting of shareholders for the election of directors, the close of business on the seventh day
following the date on which notice of such meeting is first given to shareholders.
    
    Each such notice must set forth:
    
    the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated;
    
    a representation that such shareholder is a holder of record of shares of the Common Stock of the Company and intends
to appear in person or by proxy at the meeting to nominate the person or persons identified in the notice;
    
    a description of all arrangements or understandings between such shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such
shareholder;
    
    such other information regarding each nominee proposed by such shareholder as would be required to be included in a
proxy statement under the Exchange Act and the rules and regulations thereunder (or any subsequent revisions replacing
such Act, rules or regulations) if the nominee(s) had been nominated, or were intended to be nominated, by the Board;
and
    
    the consent of each nominee to serve as a director of the Company if so elected.
    
    The Chair of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the
foregoing procedures.
 
 Process For Selecting Board Candidates
   
    
    the appropriate size of the Companys Board of Directors;
    
    the needs of the Company with respect to the particular talents and experience of its directors;
    
    the knowledge, skills and executive leadership experience of nominees, as well as working
experience at the executive leadership level in his/her field of expertise;
 22




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
    
    familiarity with the energy/utility industry;
    
    recognition by other leaders as a person of integrity and outstanding professional competence
with a proven record of accomplishments;
    
    experience in the regulatory arena;
    
    knowledge of the business of, and/or facilities for, the generation, transmission, and/or
distribution of electric energy;
    
    enhancement of the diversity and perspective of the Board; and
    
    knowledge of the customers, community and employee base.
   
 Audit Committee Report
      23




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Members of the Audit Committee
of the Board of Directors
 Kristianne Blake  Chair
    
    David A. Clack
    
    Jessie J. Knight, Jr.
    
    Michael L. Noël
 
 Director and Executive Compensation
 
 Director Compensation
  24




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2005 Director Compensation Table
 DividendBoard &
    
    EquivalentAnnual
    
    Annual Retainer
    
    
    
    
    
    Committee
    
    forTotal
    
    Retainer Paid
    
    Paid in
    
    Chair
    
    Meeting
    
    DeferredDirector Name
    
    Compensation
    
    in Cash (1)
    
    Stock (1)
    
    Retainer
    
    Fees (2)
    
    Stock (3)Erik J. Anderson
    
    $
    85,000.00
    
    
    $
    26,682.27
    
    
    $
    35,984.40
    
    
    $
    4,333.33
    
    
    $
    18,000.00
    
    
    $
    0.00Kristianne Blake
    
    $
    108,739.75
    
    
    $
    32,679.67
    
    
    $
    29,987.00
    
    
    $
    9,000.00
    
    
    $
    35,700.00
    
    
    $
    1,373.08David A. Clack
    
    $
    96,100.00
    
    
    $
    62,666.67
    
    
    $
    0.00
    
    
    $
    4,333.33
    
    
    $
    29,100.00
    
    
    $
    0.00Roy Lewis Eiguren
    
    $
    81,566.67
    
    
    $
    2,675.69
    
    
    $
    59,990.98
    
    
    $
    0.00
    
    
    $
    18,900.00
    
    
    $
    0.00Jack Gustavel
    
    $
    85,733.00
    
    
    $
    2,675.69
    
    
    $
    59,990.98
    
    
    $
    2,666.33
    
    
    $
    20,400.00
    
    
    $
    0.00John F. Kelly
    
    $
    80,800.00
    
    
    $
    32,679.67
    
    
    $
    29,987.00
    
    
    $
    4,333.33
    
    
    $
    13,800.00
    
    
    $
    0.00Jessie J. Knight, Jr.
    
    $
    90,866.67
    
    
    $
    2,675.69
    
    
    $
    59,990.98
    
    
    $
    0.00
    
    
    $
    28,200.00
    
    
    $
    0.00
 25




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DividendBoard &
    
    EquivalentAnnual
    
    Annual Retainer
    
    
    
    
    
    Committee
    
    forTotal
    
    Retainer Paid
    
    Paid in
    
    Chair
    
    Meeting
    
    DeferredDirector Name
    
    Compensation
    
    in Cash (1)
    
    Stock (1)
    
    Retainer
    
    Fees (2)
    
    Stock (3)Michael L. Noël
    
    $
    91,766.67
    
    
    $
    2,675.69
    
    
    $
    59,990.98
    
    
    $
    0.00
    
    
    $
    29,100.00
    
    
    $
    0.00Lura Powell
    
    $
    78,866.67
    
    
    $
    22,672.68
    
    
    $
    39,993.99
    
    
    $
    0.00
    
    
    $
    16,200.00
    
    
    $
    0.00R. John Taylor
    
    $
    88,628.99
    
    
    $
    22,672.68
    
    
    $
    39,993.99
    
    
    $
    1,667.00
    
    
    $
    21,300.00
    
    
    $
    2,995.32Totals
    
    $
    888,068.42
    
    
    $
    210,756.40
    
    
    $
    415,910.30
    
    
    $
    26,333.32
    
    
    $
    230,700.00
    
    
    $
    4,368.40
 
 (1)
    
    Directors have the option of taking their retainer in stock, in cash or in a
combination of stock and cash.(2)
    
    Includes fees for directors attending a subsidiary Board meeting  Blake and
Taylor are the only directors who sit on a subsidiary Board.(3)
    
    Dividends are paid on those shares that were deferred prior to December 31, 2004,
under the Non-Employee Director Stock Plan. Blake and Taylor are the only directors who
deferred receipt of stock until a later date. 
 Compensation & Organization Committee Report
     
    
    Hire, develop, reward, and retain the most competent executives possible by determining
the proper levels and types of executive compensation opportunities and take into
consideration competitive compensation levels in the marketplace.
 26




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##### Table of Contents




    
    Promote a close identity of interest between management and shareholders and encourage
decision-making that enhances shareholder value. The Committee believes that this objective
is best achieved by tying incentive opportunities to the attainment of corporate and
individual goals and through regular grants of equity compensation.
    
    Tie a significant portion of variable pay opportunity to key performance goals, including
financial and non-financial targets, that support and reinforce the Companys annual and
long-term strategic goals.
  Components of Compensation
    Base Salary
  27




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Annual Incentive Compensation
    28
    Table of Contents   Long-Term Incentive Compensation
      CEO Compensation
  29




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##### Table of Contents



Summary
  Members of the Compensation & Organization Committee of the Board of Directors
 John F. KellyChair
    
    Roy Lewis Eiguren
    
    R. John Taylor
 
 Compensation Committee Interlocks and Insider Participation
 30
    Table of Contents   
 Summary Compensation Table
 AnnualCompensation (1)
    
    
    
    
    
    
    
    
    
    Long-Term Compensation(1)Awards
    
    PayoutsLong-Restricted
    
    Shares
    
    TermStock
    
    Underlying
    
    Incentive
    
    All OtherName and Principal Position
    
    Year
    
    Salary
    
    Bonus
    
    Awards
    
    Options (#)
    
    Payouts($)
    
    Comp.($) (2)G. G. Ely
    
    
    2005
    
    
    $
    676,442
    
    
    $
    510,159
    (3)
    
    
    
    
    
    
    
    
    
    $
    1,495,368
    (4)
    
    $
    21,225
    (5)Chairman of the Board,
    
    
    2004
    
    
    $
    633,173
    
    
    $
    249,733
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    23,769President & Chief
Executive Officer
    
    
    2003
    
    
    $
    528,205
    
    
    $
    250,371
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    23,120M. K. Malquist
    
    
    2005
    
    
    $
    311,531
    
    
    $
    155,340
    (3)
    
    
    
    
    
    
    
    
    
    $
    359,910
    (4)
    
    $
    13,873
    (5)Senior Vice President
    
    
    2004
    
    
    $
    303,288
    
    
    $
    74,863
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    11,363& Chief Financial Officer
    
    
    2003
    
    
    
    254,036
    
    
    
    79,208
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9,000S. L. Morris
    
    
    2005
    
    
    $
    297,634
    
    
    $
    149,646
    (3)
    
    
    
    
    
    
    
    
    
    $
    359,910
    (4)
    
    $
    30,423
    (5)Senior Vice President
    
    
    2004
    
    
    $
    283,250
    
    
    $
    68,622
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    27,6282003
    
    
    $
    261,390
    
    
    $
    80,119
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    25,686K.S. Feltes
    
    
    2005
    
    
    $
    214,204
    
    
    $
    108,384
    (3)
    
    
    
    
    
    
    
    
    
    $
    113,208
    (4)
    
    $
    9,450
    (5)Senior Vice President &
    
    
    2004
    
    
    $
    205,346
    
    
    $
    30,052
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9,000Corporate Secretary
    
    
    2003
    
    
    $
    176,296
    
    
    $
    37,429
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9,000D. J. Meyer
    
    
    2005
    
    
    $
    240,000
    
    
    $
    98,940
    (3)
    
    
    
    
    
    
    
    
    
    $
    359,910
    (4)
    
    $
    35,440
    (5)Vice President & Chief
    
    
    2004
    
    
    $
    249,231
    
    
    $
    59,887
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    36,646Counsel for Regulatory
    
    
    2003
    
    
    $
    240,000
    
    
    $
    72,835
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    35,077& Governmental Affairs
  
 (1)
    
    Includes any amounts deferred pursuant to the Executive Deferral Plan. This plan allows
executive officers the opportunity to defer until their retirement or until their earlier
termination, disability or death, up to 75% of their base salary and/or up to 100%
incentive/bonus cash payments. Accumulated deferred compensation is credited with earnings at
a non-preferential rate. Deferrals under the Executive Deferral Plan made after December 31,
2004, are subject to the provisions of Section 409A of the Internal Revenue code (Section
409A). Section 409A was enacted as part of the American Jobs Creation Act of 2004 and
substantially impacts the federal income tax rules associated with the deferral of income
under nonqualified deferred arrangements. A transitional relief period is currently in
effect for Section 409A during which plans are required to operate in good faith compliance
with Section 409A. Internal Revenue Service and the Treasury Department have issued certain
interim and proposed guidance and are expected to issue further final guidance for compliance
with Section 409A. During the transition relief period, which has been extended through
December 31, 2006, plans may be amended to comply with Section 409A. Accordingly, during 2006, certain provisions of the Executive Deferral Plan will be modified in order to
comply with the requirements of Section 409A and such guidance.(2)
    
    The Company does not provide any perquisites or other personal benefits to its executive
officers.(3)
    
    Cash awards made to certain executive officers for 2005 performance in accordance with the
Executive Incentive Compensation Plan.(4)
    
    Total value of shares paid out to Executive Officers under the Long-Term Incentive Plan for
the performance share cycle, which ended on December 31, 2005. Participants received 120% of
the target number of shares covered by the original awards since Avista ranked in the 67th
percentile among the S&P 400 Utilities Index. Amounts also include the settlement of
dividends on the total shares awarded to each individual. Of these amounts, Malquist
deferred 50% of his award and Meyer deferred 20% of his award under the Executive Deferral
Plan. The first cycle of three-year performance awards were granted in 2003. Therefore no
awards were paid in 2003 and 2004.(5)
    
    Includes employer matching contributions under both the Executive Deferral Plan and the
Investment and Employee Stock Ownership Plan (401(k) plan), pursuant to which the Company 31




---



##### Table of Contents



matches 75% of each executive officers deferral up to 6% of salary. Also includes payments
for unused, paid time-off accrued under the Companys One-Leave Program. Amounts for 2005
under the Deferral Plan were: Ely$11,775; Malquist$4,423; Meyer$1,990; Morris$3,521;
Feltes$0. Amounts for 2005 under the 401(k) plan were: Ely$9,450; Malquist$9,450;
Meyer$9,450; Morris$9,450; Feltes$9,450. Amounts for 2005 under the One-Leave Program
were: Ely$0; Malquist$0; Meyer$24,000 (230 hrs.); Morris$17,452 (120 hrs.); Feltes$0. 
 Aggregated Option Exercises
in Last Fiscal Year and FY End Option Values
Of Avista and any Indirect Subsidiaries
 Shares
    
    
    
    
    
    Number of Shares
    
    Value of Unexercised In-the-Acquired
    
    
    
    
    
    Underlying Unexercised
    
    Moneyon
    
    Value
    
    Options at FY-End (#)
    
    Options at FY-End($)Name
    
    Exercise(#)
    
    Realized($)
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableG. G. Ely
    
    
    0
    
    
    
    0
    
    
    
    374,063
    
    
    
    27,188
    
    
    $
    1,547,431
    
    
    $
    204,994M. K. Malquist
    
    
    0
    
    
    
    0
    
    
    
    57,188
    
    
    
    19,063
    
    
    $
    398,944
    
    
    $
    132,981S. L. Morris
    
    
    0
    
    
    
    0
    
    
    
    88,188
    
    
    
    6,563
    
    
    $
    359,774
    
    
    $
    49,481K. S. Feltes
    
    
    0
    
    
    
    0
    
    
    
    37,750
    
    
    
    2,250
    
    
    $
    122,935
    
    
    $
    16,965D. J. Meyer
    
    
    0
    
    
    
    0
    
    
    
    131,188
    
    
    
    6,563
    
    
    $
    363,294
    
    
    $
    49,481
 
 Long-Term Incentive Plan Awards
in Last Fiscal Year
 Number of Shares, Unitsor Other
    
    Performance or Other Period UntilName
    
    Rights (#)
    
    Maturation or PayoutG. G. Ely
    
    
    64,400
    
    
    3yrs; 12/31/2007M. K. Malquist
    
    
    15,500
    
    
    3yrs; 12/31/2007S. L. Morris
    
    
    15,500
    
    
    3yrs; 12/31/2007K. S. Feltes
    
    
    5,300
    
    
    3yrs; 12/31/2007D. J. Meyer
    
    
    5,300
    
    
    3yrs; 12/31/2007
   32




---



##### Table of Contents



Pension Plan Table
 Years of Credited ServiceRemuneration
    
    15
    
    20
    
    25
    
    30$200,000
    
    $
    75,000
    
    
    $
    100,000
    
    
    $
    125,000
    
    
    $
    150,000$250,000
    
    $
    93,750
    
    
    $
    125,000
    
    
    $
    156,250
    
    
    $
    187,500$300,000
    
    $
    112,500
    
    
    $
    150,000
    
    
    $
    187,500
    
    
    $
    225,000$350,000
    
    $
    131,250
    
    
    $
    175,000
    
    
    $
    218,750
    
    
    $
    262,500$400,000
    
    $
    150,000
    
    
    $
    200,000
    
    
    $
    250,000
    
    
    $
    300,000$450,000
    
    $
    168,750
    
    
    $
    225,000
    
    
    $
    281,250
    
    
    $
    337,500$500,000
    
    $
    187,500
    
    
    $
    250,000
    
    
    $
    312,500
    
    
    $
    375,000$550,000
    
    $
    206,250
    
    
    $
    275,000
    
    
    $
    343,750
    
    
    $
    412,500$600,000
    
    $
    225,000
    
    
    $
    300,000
    
    
    $
    375,000
    
    
    $
    450,000$650,000
    
    $
    243,750
    
    
    $
    325,000
    
    
    $
    406,250
    
    
    $
    487,500$700,000
    
    $
    262,500
    
    
    $
    350,000
    
    
    $
    437,500
    
    
    $
    525,000$750,000
    
    $
    281,250
    
    
    $
    375,000
    
    
    $
    468,750
    
    
    $
    562,500$800,000
    
    $
    300,000
    
    
    $
    400,000
    
    
    $
    500,000
    
    
    $
    600,000$850,000
    
    $
    318,750
    
    
    $
    425,000
    
    
    $
    531,250
    
    
    $
    637,500
    33
    Table of Contents   Years ofYears of
    
    CreditedCompany
    
    ServiceName
    
    Service
    
    (SERP)G. G. Ely
    
    
    39
    
    
    
    30M. K. Malquist (1)
    
    
    3
    
    
    
    3S. L. Morris
    
    
    24
    
    
    
    24K. S. Feltes
    
    
    8
    
    
    
    8D. J. Meyer (2)
    
    
    7
    
    
    
    27
 
 (1)
    
    In accordance with Mr. Malquists employment agreement as described in this proxy
statement, Mr. Malquist will be credited with three (3) years vesting service and two
(2) years benefit service for each completed year of employment after he has had five
(5) years of service with the Company.(2)
    
    Mr. Meyer was granted twenty (20) years of credited service upon his employment. 
 Change of Control Agreements and Other Compensatory Plans
 Change of Control Agreements
 34
    Table of Contents   Employment AgreementM. K. Malquist
 1 3
 Supplemental Executive Disability Plan
  Executive Income Continuation Plan
 35
    Table of Contents   
 Performance Graph
Comparison of Five-Year Cumulative Total Returns  Avista vs. Industry Indexes
  
 2001
    
    2002
    
    2003
    
    2004
    
    2005Avista
    
    
    66.67
    
    
    
    60.40
    
    
    
    98.07
    
    
    
    98.45
    
    
    
    101.66S&P500 Index
    
    
    88.11
    
    
    
    68.64
    
    
    
    88.33
    
    
    
    97.94
    
    
    
    102.75S&P400 Electric Utilities
    
    
    89.40
    
    
    
    80.21
    
    
    
    102.43
    
    
    
    115.54
    
    
    
    120.83
 
 (1)
    
    The S&P 500 Index consists of 500 stocks chosen for market size, liquidity and industry group
representation.(2)
    
    The S&P 400 Electric Utilities Index currently includes 17 electric utility companies. 36
    Table of Contents  Section 16(a) Beneficial Ownership Reporting Compliance
  
 Class Action Securities Litigation
  
 37
    Table of Contents  PROPOSAL 2
 HOLDING COMPANY PROPOSAL
 
 General
     The Board of Directors unanimously recommends a vote FOR the approval of the Holding Company
Proposal. See Reasons for Holding Company Proposal.
 
 
 Background
 
 
  
 
  
 38
    Table of Contents  Corporate Reorganization
 General
 
 Avista Corporation
 
 
  
 
 
    
    Avista Utilities generates, transmits and distributes electric energy and
distributes natural gas. Avista Utilities also engages in wholesale purchases and
sales of electric capacity and energy.
    
    The Energy Marketing and Resource Management business segment is comprised primarily
of Avista Energy, Inc., which is engaged in electricity and natural gas marketing,
trading and resource management. This segment also includes Avista Power, Inc., which
owns an interest in a gas-fired generating plant.
    
    Avista Advantage, Inc. is a provider of facility information and cost management
services for multi-site customers.
    
    The Other business segment, which is conducted through various subsidiaries,
includes sheet metal fabrication, radiant floor heating systems and certain real estate
investments. Avista intends to limit its future investments in this business segment.
 
 
 AVA Formation Corp.
 
 
  
 Similarities between AVA and Avista
  
    
    AVA, like Avista, is a Washington corporation;
    
    AVAs authorized capital will be the same as that of Avista;
    
    AVAs Board of Directors, as of the Effective Time, will be the same as Avistas
Board of Directors immediately prior to the Effective Time; and
    
    the senior executive officers of AVA, as of the Effective Time, will be senior
executive officers of Avista.
 39
    Table of Contents  Effect of Share Exchange
  
    
    Former holders of outstanding shares of Avista Common Stock will hold shares of AVA
Common Stock;
    
    AVA will own all of the outstanding shares of Avista Common Stock; and
    
    Avista will continue to own, directly or indirectly, the outstanding shares of
common stock of its subsidiaries that it currently holds.
  Avista Capital Dividend
  
    
    Avista becoming a subsidiary of AVA (and being renamed Avista Utilities, Inc.); and
    
    Avista Capital also becoming a direct subsidiary of AVA (instead of a subsidiary of
Avista).
  
 
 Reasons for Holding Company Proposal
 General
 
  
 40
    Table of Contents  Industry Changes
  Benefits
 
  
  
    
    Avistas traditional utility operations would be more separated from the non-utility
businesses, thereby further ensuring that cross subsidization is avoided and that
business risk is not transferred from other segments of the business to the traditional
utility operations.
    
    The new structure would provide better legal protection for Avista Utilities from
liabilities arising from other segments of the business.
    
    The new structure would provide the opportunity for AVA to consider alternative
businesses and business relationships that are complementary to but separate from the
utility business.
    
    The new structure would permit investors, analysts, and rating agencies to more
easily analyze and value AVAs individual lines of business. Capital structures may be
used that are better suited to the particular requirements, characteristics and risks
of the other
 41
    Table of Contents  businesses without affecting the capital structure or creditworthiness of Avista
Utilities and may increase the financial flexibility of the other businesses.
  
 
 Potential Negative Consequences
 
 
 Risk Factors"
 
 
 Plan of Exchange
  
 Required Shareholder Approval
  
 Required Regulatory Approvals
  42
    Table of Contents  
    
    the cost of the formation of the holding company structure will not be included in
future Avista Utilities ratemaking proposals;
    
    Avista will continue to provide access to information for AVA and all subsidiaries
for audit purposes;
    
    Avista will continue to maintain prudent utility operating standards;
    
    Avista will continue to maintain internal controls that preclude
cross-subsidization between the utility and other subsidiaries;
    
    Avista will continue to assure segregation of operations among the utility and other
affiliated entities, and prevent co-mingling of assets, and will continue to comply
with all applicable statutes, rules and commission practices regarding property
transfers, affiliated or subsidiary transactions and securities transactions; and
    
    AVA costs (or corporate support costs) will be fairly allocated among the utility
and other subsidiaries.
 
 Regulation of AVA
   43
    Table of Contents  Business of AVA
 
  
 
 Amendment or Termination of Plan of Exchange
  
  
 
 Effective Time of Share Exchange; Conditions
  
    
    approval of the Share Exchange by the holders of Avista Common Stock;
    
    approval of the Share Exchange by the State Commissions (or, in the case of the
MPSC, disclaimer of jurisdiction, if deemed necessary) and the FERC, which approvals
shall not include, in the sole judgment of the Avista Board of Directors, any
unacceptable conditions;
    
    listing of AVA Common Stock on the New York Stock Exchange, upon official notice of
issuance;
    
    receipt by Avista of a favorable opinion of Heller Ehrman LLP covering certain
United States federal income tax matters; and
    
    consents under various financing agreements of Avista.
  44
    Table of Contents  Notice of Effectiveness of Share Exchange
  
 Exchange of Stock Certificates Not Required
  
 Material United States Income Tax Consequences
 
  
   Accordingly, Avista shareholders are urged to consult their own tax advisors as to the specific
federal, state, local and foreign tax consequences to them of the Share Exchange and tax reporting
requirements with respect thereto.
 45
    Table of Contents  The Share Exchange
 
  
 
  
   
 Description of AVA Common Stock; Comparative Shareholder Rights
 General
    46
    Table of Contents  Dividend Rights
   Voting Rights
   Liquidation Rights
   Pre-Emptive Rights
  Preferred Stock
   Classified Board of Directors
  47
    Table of Contents  Miscellaneous Corporate Governance Provisions
  
    
    the number of directors shall not exceed eleven (except in circumstances in which
holders of AVA Preferred Stock are entitled to elect members of the Board);
    
    directors may be removed only for cause and only by the affirmative vote of the
holders of a majority of the voting power of the shares of the company entitled
generally to vote in the election of directors at a meeting of shareholders expressly
called for that purpose;
    
    any vacancy on the Board may be filled by the remaining directors then in office
even though less than a quorum; and
    
    special meetings of shareholders may be called only by the President, the Chairman
of the Board, a majority of the Board of Directors, or the Executive Committee of the
Board, and shall be called by the Corporate Secretary at the request of the holders of
not less than two-thirds of all the outstanding shares of AVA Common Stock; and only
matters specified in the call of or request for a special meeting may be considered or
voted on at such meeting.
  
    
    a holder of AVA Common Stock may nominate persons for election as directors only if
written notice (meeting specified requirements) of intention to make such nomination is
given to the Corporate Secretary not later than (i) in the case of an annual meeting of
shareholders, 90 days in advance of the meeting or (ii) in the case of a special
meeting of shareholders, the seventh day after the date on which notice is first given
to shareholders; and
    
    a holder of AVA Common Stock may propose business to be brought before an annual
meeting of shareholders only if, among other things (i) such business is a proper
matter for shareholder action under the Washington BCA and (ii) the shareholder shall
give written notice (meeting specified requirements of intention to bring such business
before the meeting is given to the Corporate Secretary (subject to certain exceptions)
not less than 120 nor more than 180 days prior to the first anniversary of the date on
which AVA first mailed its proxy materials for the preceding annual meeting of
shareholders.
 2 3
 Limitation of Liability; Indemnification
  
    
    directors will not be liable to AVA or its shareholders for monetary damages for
conduct as a director, except as such limitation is prohibited by law; and
 48
    Table of Contents  
    
    AVA will indemnify its directors against liability and expenses to the fullest
extent permitted by law.
 Amendments to AVA Articles of Incorporation
     Amendments to Bylaws
  provided, however 2 3
  Statutory Limitation on Significant Business Transactions
 General
  49
    Table of Contents  Significant Business Transactions Within Five Years of Share Acquisition Time
  
    
    such significant business transaction; or
    
    the purchase of shares made by such acquiring person.
 Significant Business Transactions More Than Five Years After Share Acquisition Time
  
    
    the transaction complies with certain fair price provisions specified in the
statute; or
    
    no earlier than five years after the acquiring persons share acquisition time,
the significant business transaction is approved at an annual or special meeting of
AVAs shareholders (in which the acquiring persons shares may not be counted in
determining whether the significant business transaction has been approved).
 Definitions
   
    
    a merger, share exchange, or consolidation of AVA or any of its subsidiaries with an
acquiring person or its affiliate;
    
    a sale, lease, transfer or other disposition to an acquiring person or its
affiliate of assets of AVA or any of its subsidiaries having an aggregate market value
equal to 5% or more of all of the assets determined on a consolidated basis, or all the
outstanding shares of AVA, or representing 5% or more of its earning power or net
income determined on a consolidated basis;
    
    termination, at any time over the five-year period following the share acquisition
time, of 5% or more of the employees of AVA as a result of the acquiring persons
acquisition of 10% or more of the shares of AVA; and
    
    the issuance or redemption by AVA or any of its subsidiaries of shares (or of
options, warrants, or rights to acquire shares) of AVA or any of its subsidiaries to or
beneficially owned by an acquiring person or its affiliate except pursuant to an
offer, dividend distribution or redemption paid or made pro rata to all shareholders
(or holders of options, warrants or rights).
   50
    Table of Contents  Anti-Takeover Effect
  2 3
   
 Certain Attributes of Avista Common Stock
 General
  Fair Price Provision
  
    
    such business combination shall have been approved by a majority of the Avista
directors unaffiliated with the Interested Shareholder; or
    
    certain minimum price and procedural requirements are met. The Avista Articles
provide that the fair price provision may be altered, amended or repealed only by the
affirmative vote of the holders of at least 80% of the outstanding shares of Avista
Common Stock.
  51
    Table of Contents  Sales of Assets
 2 3
 2 3
  Avista Shareholder Rights Plan
 General
   Flip-in
  Flip-over
  52
    Table of Contents  Exchange
  Redemption
  Certain Adjustments
  Expiration
  AVA Shareholder Rights Plan
  
 Listing of AVA Common Stock
 
  
  53
    Table of Contents  Dividends
 Dividends on AVA Common Stock
  
  
 Dividends on Avista Common Stock
    The declaration and payment of future dividends will be at the discretion of the Board of Directors
of each of AVA, Avista and AVAs other direct and indirect subsidiaries. There can be no assurance
that payment of dividends will continue at current levels.
 
 Directors and Management of AVA
  54
    Table of Contents  Name
    
    OfficeGary G. Ely
    
    Chairman of the Board, President and Chief Executive
OfficerMarian M. Durkin
    
    Senior Vice President and General CounselKaren S. Feltes
    
    Senior Vice President and Corporate SecretaryMalyn K. Malquist
    
    Senior Vice President, Treasurer and Chief Financial
OfficerScott L. Morris
    
    Senior Vice President
 
 Proposal
1 Election of Directors,
 
 
 Change of Control and Other Agreements
 Proposal 1  Election of Directors
 Proposal 1  Election of Directors
 
 Executive Compensation and Employee Benefit Plans
  Proposal 1  Election of Directors
 55
    Table of Contents  Transfer Agent and Registrar
  
 Market Price of Avista Common Stock
  
 Validity of AVA Common Stock
  
 Experts
 
  
 
 Rights of Dissent
  56
    Table of Contents  
    
    the beneficial shareholder submits to Avista the record shareholders consent to the
dissent not later than the time the beneficial shareholder asserts dissenters rights,
which consent shall be set forth in a written notice or other tangible medium; and
    
    the beneficial shareholder does so with respect to all shares of which such
shareholder is the beneficial shareholder or over which such shareholder has power to
direct the vote.
  Step 1: Deliver Notice of Intent to Demand Payment
  Step 2: Vote Against or Abstain From Voting on the Holding Company Proposal
  Step 3: Timely Deliver a Demand For Payment
  
    
    where the payment demand must be sent;
    
    where and when certificates for certificated shares must be deposited;
    
    for holders of uncertificated shares, to what extent transfer of uncertificated
shares will be restricted after the payment demand is received;
    
    a form for demanding payment that includes the date of the first announcement to
news media or to shareholders of the terms of the Share Exchange and requires the
person asserting dissenters rights certify whether or not such person acquired
beneficial ownership of the shares before that date;
 57
    Table of Contents  
    
    the date by which Avista must receive the payment demand, which date may not be less
than 30 or more than 60 days after the dissenters notice is delivered; and
    
    a copy of Chapter 23B.13 of the Washington BCA.
  Step 4: Accept or Timely Reject Payment by Avista
  
    
    Avistas balance sheet as of the end of a fiscal year ended not more than 16 months
before the date of payment, an income statement for that year, a statement of changes
in shareholders equity for that year, and the latest available interim financial
statements, if any, and
    
    an explanation of how Avista estimated the fair value of the shares and how the
interest was calculated;
    
    a statement of the dissenters right to demand payment under the Washington BCA; and
    
    a copy of Chapter 23B.13 of the Washington BCA.
   
    
    the dissenter believes that the amount paid or offered is less than the fair value
of the dissenters shares or that the interest due is incorrectly calculated;
    
    Avista fails to make payment within 60 days after the date set for demanding
payment; or
    
    the Plan of Exchange is not effected, and Avista does not return the deposited
Avista certificates or release the transfer restrictions imposed on uncertificated
shares within 60 days after the date set for demanding payment.
  58
    Table of Contents  59
    Table of Contents  PROPOSAL 3
 RATIFICATION OF APPOINTMENT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
   The Board of Directors recommends a vote FOR the proposal to ratify the selection of Deloitte &
Touche LLP as the independent registered public accounting firm to audit the books, records, and
accounts of the Company for the year 2006.
 Auditors Fees
  
 2005
    
    
    2004Audit Fees (a)
    
    $
    1,505,815
    
    
    $
    1,527,358Audit-Related Fees (b)
    
    
    133,291
    
    
    
    35,674Tax Fees (c)
    
    
    57,366
    
    
    
    43,702All Other Fees (d)
    
    
    3,000
    
    
    
    3,250Total
    
    $
    1,699,472
    
    
    $
    1,609,984
 
  
    
    Audit of the Companys annual consolidated financial statements.
    
    Reviews of the Companys quarterly reports on Form 10-Q.
    
    Comfort letters, agreed-upon procedures, statutory and regulatory audits, consents and other
services related to SEC matters.
    
    Consultation on accounting standards.
   60
    Table of Contents  SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
 Management
  61
    Table of Contents  Number ofSharesUnderlying
    
    
    Number ofOptions
    
    
    SharesExercisable
    
    
    UnderlyingWithin
    
    
    OtherName
    
    Direct
    
    
    Indirect
    
    
    60 Days(1)
    
    
    Options(1)
    
    
    TotalErik J. Anderson
    
    
    9,172
    
    
    
    
    
    
    
    9,000
    
    
    
    
    
    
    
    18,172Kristianne Blake (2)
    
    
    6,724
    
    
    
    
    
    
    
    12,000
    
    
    
    
    
    
    
    18,724David A. Clack (3)
    
    
    14,320
    
    
    
    10,256
    
    
    
    15,000
    
    
    
    
    
    
    
    39,576Roy Lewis Eiguren
    
    
    8,178
    
    
    
    830
    
    
    
    6,000
    
    
    
    
    
    
    
    15,008Gary G. Ely (4)
    
    
    65,218
    
    
    
    41,163
    (5)
    
    
    374,063
    
    
    
    27,187
    
    
    
    507,631Karen S. Feltes (6)
    
    
    5,204
    
    
    
    3,212
    (5)
    
    
    37,750
    
    
    
    2,250
    
    
    
    48,416Jack W. Gustavel
    
    
    10,919
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,919John F. Kelly
    
    
    12,209
    
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    27,209Jessie J. Knight, Jr.
    
    
    16,257
    
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    31,257Malyn K. Malquist (7)
    
    
    7,610
    
    
    
    10,439
    (8)
    
    
    57,188
    
    
    
    19,062
    
    
    
    94,299David J. Meyer (9)
    
    
    23,098
    
    
    
    15,089
    (10)
    
    
    131,188
    
    
    
    6,562
    
    
    
    175,937Scott L. Morris (12)
    
    
    15,482
    
    
    
    8,035
    (5)
    
    
    88,188
    
    
    
    6,562
    
    
    
    118,267Michael L. Noël
    
    
    5,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,800Lura J. Powell
    
    
    7,249
    
    
    
    
    
    
    
    3,000
    
    
    
    
    
    
    
    10,249Heidi B. Stanley
    
    
    
    
    
    
    8,732
    (11)
    
    
    
    
    
    
    
    
    
    
    8,732R. John Taylor (13)
    
    
    18,438
    
    
    
    4,998
    (14)
    
    
    15,000
    
    
    
    
    
    
    
    38,436All directors and
executive officers as a
group, including those
listed above23
individuals
    
    
    243,050
    
    
    
    144,268
    
    
    
    970,502
    
    
    
    72,073
    
    
    
    1,429,893
 
 (1)
    
    Avista Common Stock options granted under the Long-Term Incentive Plan. Options reflected
in the Other Options column are not exercisable within sixty days. The options vesting
schedule will not be accelerated as a result of the consummation of the Holding Company
Proposal.(2)
    
    In addition to the shares beneficially owned and reflected in this table, Mrs. Blake will
also receive at a later date 2,519 shares of Avista Common Stock for which she has deferred
receipt, in accordance with the provisions of the Companys former Non-Employee Director Stock
Plan.(3)
    
    Mr. Clack is retiring on May 11, 2006 and will not be standing for re-election.(4)
    
    In addition to the shares beneficially owned and reflected in this table, Mr. Ely has been
credited with 40,418 shares of Avista Common Stock in the Companys Executive Deferral Plan.
At the February 9, 2006 Compensation Committee meeting, Mr. Ely was granted 12,600 restricted
shares of Avista Common Stock, subject to provisions of the Long-Term Incentive Plan. The
restricted stock shares are not reflected in this table, since they have not yet been issued.(5)
    
    Shares held in the Companys 401(k) Investment Plan. 
 62
    Table of Contents  (6)
    
    At the February 9, 2006 Compensation Committee meeting, Ms. Feltes was granted 3,000
restricted shares of Avista Common Stock, subject to the provisions of the Long-Term Incentive
Plan. The restricted stock shares are not reflected in this table, since they have not yet
been issued.(7)
    
    In addition to the shares beneficially owned and reflected in this table, Mr. Malquist has
been credited with 5,245 shares of Avista Common Stock in the Companys Executive Deferral
Plan. At the February 9, 2006 Compensation Committee meeting, Mr. Malquist was granted 3,000
restricted shares of Avista Common Stock, subject to the provisions of the Long-Term Incentive
Plan. The restricted stock shares are not reflected in this table, since they have not yet
been issued.(8)
    
    Includes 2,439 shares held in the Companys 401(k) Investment Plan and 8,000 shares held in a
Family Trust Account.(9)
    
    In addition to the shares beneficially owned and reflected in this table, Mr. Meyer has been
credited with 2,098 shares of Avista Common Stock in the Companys Executive Deferral Plan.
At the February 9, 2006 Compensation Committee meeting, Mr. Meyer was granted 1,000 restricted
shares of Avista Common Stock, subject to the provisions of the Long-Term Incentive Plan. The
restricted stock shares are not reflected in this table, since they have not yet been issued.(10)
    
    Includes 9,346 shares held in the Companys 401(k) Investment Plan and 5,743 shares held in
an IRA account.(11)
    
    Shares held by Ms. Stanleys spouse in a profit-sharing plan not administered by the Company.(12)
    
    At the February 9, 2006 Compensation Committee meeting, Mr. Morris was granted 3,000
restricted shares of Avista Common Stock, subject to the provisions of the Long-Term Incentive
Plan. The restricted stock shares are not reflected in this table, since they have not yet
been issued.(13)
    
    In addition to the shares beneficially owned and reflected in this table, Mr. Taylor will
also receive at a later date 5,496 shares of Avista Common Stock for which he has deferred
receipt, in accordance with the provisions of the Non-Employee Director Stock Plan.(14)
    
    Includes 4,000 shares held in an employee benefit plan not administered by the Company for
which Mr. Taylor shares voting and investment power and 998 shares held by Mr. Taylor as
custodian for his children. 
 
 
 ANNUAL REPORT AND FINANCIAL STATEMENTS
 
 
  
  
 OTHER BUSINESS
  
 2007 ANNUAL MEETING OF SHAREHOLDERS
  63
    Table of Contents  Proposals to be Included in Managements Proxy Materials
  Other Proposals
   
 EXPENSE OF SOLICITATION
   
 
 64
    Table of Contents  APPENDIX I
 NYSE REQUIREMENTS FOR DIRECTOR INDEPENDENCE
 
 AVISTA CORP. CATEGORICAL STANDARDS
    
    
    is, or within the past three years has been, employed by Avista Corp. or has
an immediate family member who is, or within the past three years has been, an
executive officer of Avista Corp.
    
    received, or has an immediate family member who received, during any
12-month period within the last three years, more than $100,000 in direct
compensation from Avista Corp., other than director or committee fees and
pension or other forms of deferred compensation for prior service (provided
such compensation is not contingent in any way on continued service).
    
    (i) is a partner or employee of Avista Corp.s independent auditor, (ii) has
an immediate family member who is a partner of Avista Corp.s independent
auditor or an employee that participates in such firms audit, assurance or tax
compliance practice or (iii) was, or has an immediate family member that was,
within the past three years, a partner or employee of Avista Corp.s
independent auditor and personally worked on Avista Corp.s audit.
    
    is, or has an immediate family member who is, or in the past three years has
been, employed as an executive officer of another company in which an executive
officer of Avista Corp. at the same time serves or served on that companys
compensation committee.
    
    is an employee, or has an immediate family member who is an executive
officer, of a company (excluding charitable organizations) that has made
payments to, or received payments from, Avista Corp. for property or services
in an amount which, in any of the last three fiscal years, exceeds the greater
of $1 million or 2% of such other companys consolidated gross revenues.
  a.
    
    Personal Relationships. The following relationships are not
considered material relationships that would impair a directors independence:
 I-1
    Table of Contents  i.
    
    The director or immediate family member resides
within a service area of, and is provided with utility service by
Avista Corp., and utility service is provided in the ordinary course of
Avista Corp.s business at rates or charges fixed in conformity with
law or governmental authority.ii.
    
    The director or immediate family member holds
(including holdings by an entity with which the director or an
immediate family member is affiliated as a director, officer, employee,
or otherwise) securities issued publicly by Avista Corp. or its
subsidiaries, provided the director or immediate family member receives
no extra benefit not shared on a pro rata basis.
 b.
    
    Business Relationships. All payments between Avista Corp. and
an entity that is affiliated with a director or an immediate family member for
goods or services, or other contractual arrangements, must be made in the
ordinary course of business and on substantially the same terms as those
prevailing at the time for comparable transactions with non-affiliated persons.
The following relationships will not be considered to be material
relationships that would impair a directors independence:
 i.
    
    The entity affiliated with the director or
immediate family member resides within a service area of, and is
provided with utility service by Avista Corp., and utility service is
provided in the ordinary course of Avista Corp.s business at rates or
charges fixed in conformity with law or governmental authority.ii.
    
    Payments made by Avista Corp. to an entity with
which the director or an immediate family member of the director is (or
was within the preceding three years) affiliated as a director,
employee or otherwise of such company or payments received by Avista
Corp. from such entity, for property or services, if the total amount
of the payments made or received in each of the entitys preceding
three fiscal years does not exceed the greater of $1 million or two
percent (2%) of the total gross revenues of such company in the
applicable fiscal year, and the director and any immediate family
members do not (and did not in the preceding three fiscal years)
directly or indirectly own, in the aggregate, more than 10% of the
entity.iii.
    
    If a director is a partner in or of counsel to
a law firm, the director (or an immediate family member) does not
personally perform any legal services for Avista Corp., and the fees
paid to the firm by Avista Corp. during each of the current fiscal year
and each of such firms three preceding fiscal years do not exceed the
greater of $200,000 or two percent (2%) of either such firms gross
annual revenues or the Companys gross annual revenues.
 c.
    
    Banking Relationships. A director will not fail to be
independent from management solely as a result of lending relationships,
deposit relationships or other banking relationships (including, without
limitation, trust department, investment and insurance relationships) between
Avista Corp., on the one hand, and the director (or an immediate family member)
or an entity with which the director (or an immediate family member) is
affiliated, on the other hand, provided that:
 i.
    
    such relationships are in the ordinary course
of business of Avista Corp. and are on substantially the same terms as
those prevailing at the time for comparable transactions with
non-affiliated parties,
    Table of Contents  ii.
    
    the amount of indebtedness does not exceed
three percent (3%) of the affiliated companys assets in any of the
last three fiscal years, andiii.
    
    such banking relationship does not involve the
payment of interest and other fees that exceed any of the threshold
amounts specified in Section b. iii. above.
 d.
    
    Relationships with Not-for-Profit Entities. A directors
independence will not be considered impaired solely for the reason that the
director or an immediate family member is an officer, director or trustee of a
foundation, university or other not-for-profit organization that receives from
Avista Corp. during the current fiscal year or any of the prior three fiscal
years, contributions in an amount not exceeding the greater of $200,000 or two
percent (2%) of the not-for-profit organizations aggregate annual charitable
receipts during the entitys fiscal year.e.
    
    Other Relationships. For relationships not covered above, the
determination of whether the relationship is material or not, and therefore
whether a director would be independent or not, shall be made in good faith by
the directors the Board has determined are independent.
    Table of Contents  EXHIBIT A PLAN OF SHARE EXCHANGE THIS PLAN OF SHARE EXCHANGE (the Plan of
Exchange), dated as of February 13, 2006, is
between Avista Corporation, a Washington corporation
(Avista), the corporation whose shares of
common stock will be acquired pursuant to the exchange provided
for in this Plan of Exchange (the Exchange),
and AVA Formation Corp., a Washington corporation
(AVA), the acquiring corporation. Avista and
AVA, together, are referred to in this Plan of Exchange as the
Companies. RECITALS: A. The authorized capital of Avista consists of
(a) 200,000,000 shares of common stock, without
nominal or par value (Avista Common Stock),
of which 48,593,873 shares were issued and outstanding as
of January 15, 2006, and (b) 10,000,000 shares of
preferred stock, without nominal or par value (Avista
Preferred Stock), of which 262,500 shares were
issued and outstanding as of December 31, 2005. The number
of issued and outstanding shares of Avista Common Stock is
subject to increase to the extent that additional shares are
issued prior to the Effective Time (as defined below). B. AVA is a wholly-owned subsidiary of Avista, with
authorized capital of (a) 200,000,000 common shares,
without nominal or par value (AVA Common
Stock), of which one hundred (100) shares are
issued and outstanding and owned by Avista, and
(b) 10,000,000 preferred shares, without nominal or par
value, none of which are issued. C. The Boards of Directors of the Companies deem it
desirable and in the best interests of the Companies and the
shareholders of Avista that, at the Effective Time, each share
of Avista Common Stock be exchanged for one share of AVA Common
Stock, with the result that AVA becomes the owner of all
outstanding shares of Avista Common Stock and that each holder
of shares of Avista Common Stock shall automatically become the
holder of an identical number of shares of AVA Common Stock, all
on the terms and subject to the conditions set forth below. D. The Boards of Directors of the Companies have each
adopted this Plan of Exchange. The Board of Directors of Avista
has voted Avistas shares of AVA Common Stock to approve,
and recommended that the shareholders of Avista approve, this
Plan of Exchange pursuant to the Washington Business Corporation
Act, Title 23B, Revised Code of Washington, as amended (the
Act), and specifically
Section 23B.11.030 of the Act. NOW, THEREFORE, the Companies agree as follows: ARTICLE I This Plan of Exchange shall be submitted to the holders of
Avista Common Stock for approval as provided by
Section 23B.11.030 of the Act. The affirmative vote of at
least two-thirds ( 2/3) of the outstanding shares of Avista
Common Stock shall be necessary to approve the Plan of Exchange. ARTICLE II Subject to the terms and conditions of this Plan of Exchange,
the Exchange shall become effective immediately following the
close of business on the date of filing with the Secretary of
State of the State of Washington (the Secretary of
State) of articles of share exchange pursuant to
Section 23B.11.050 of the Act (the Articles),
or at such later time and date as may be stated in the Articles
(the time and date at and on which the Exchange becomes
effective, the Effective Time). A-1
    Table of Contents  ARTICLE III A. At the Effective Time:  (1) Each share of Avista Common Stock issued and
    outstanding immediately prior to the Effective Time shall be
    automatically exchanged for one share of AVA Common Stock, which
    share shall be fully paid and nonassessable.(2) AVA shall acquire and become the owner and holder of
    each issued and outstanding share of Avista Common Stock so
    exchanged.(3) Each share of AVA Common Stock issued and outstanding
    immediately prior to the Effective Time shall be canceled and
    shall constitute an authorized but unissued share of AVA Common
    Stock.(4) Each right to receive shares of Avista Common Stock and
    each unexpired and unexercised option to purchase shares of
    Avista Common Stock (each, an Avista Grant)
    under an Avista executive compensation or employee benefit plan
    (each, an Avista Plan), whether vested or
    unvested, shall, pursuant to an amendment to each such Avista
    Plan, become the right to receive an equal number of shares of
    AVA Common Stock or an option to purchase, at the same price per
    share specified in such Avista Grant, that number of shares of
    AVA Common Stock equal to the number of shares of Avista Common
    Stock that could have been purchased immediately prior to the
    Effective Time (assuming full vesting), as the case may be,
    under the Avista Plans. Each Avista Grant shall be subject to
    the same terms and conditions as are set forth in the Avista
    Plans.(5) Each share of Avista Common Stock held under the Avista
    Direct Stock Purchase and Dividend Reinvestment Plan (the
    Dividend Reinvestment Plan) immediately prior
    to the Effective Time shall automatically be exchanged for an
    equal number (including fractional and uncertificated shares) of
    shares of AVA Common Stock, and shall continue to be held under
    the Dividend Reinvestment Plan. B. Each former holder of shares of Avista Common Stock
shall be entitled to receive only (1) shares of AVA Common
Stock in exchange for such Avista Common Stock as provided in
this Plan of Exchange or (2) payment of the fair value of
such shares of Avista Common Stock under Chapter 23B.13 of
the Act. C. As of the Effective Time, AVA shall adopt any of the
Avista Plans as in effect immediately prior to the Effective
Time under which Avista Grants are outstanding or that continues
to provide for new Avista Grants. The Avista Plans shall be
appropriately amended to provide for the issuance and delivery
of AVA Common Stock on and after the Effective Time on
substantially the same terms as Avista Common Stock would have
been issuable thereunder immediately prior to the Effective Time. D. As of the Effective Time, AVA shall succeed to the
Dividend Reinvestment Plan as in effect immediately prior to the
Effective Time, and the Dividend Reinvestment Plan shall be
appropriately amended to provide for the issuance and delivery
of AVA Common Stock on and after the Effective Time. E. As of the Effective Time, each and every preferred share
purchase right granted pursuant to the Rights Agreement, dated
as of November 15, 1999, between Avista and the Bank of New
York as successor Rights Agent, as amended, shall expire and no
further rights shall be granted. ARTICLE IV The filing of the Articles with the Secretary of State and the
consummation of the Exchange are subject to satisfaction of each
of the following conditions precedent:  A. The approval by the holders of Avista Common Stock
    provided for in Article I of this Plan of Exchange;B. the receipt of such orders, authorizations, approvals,
    waivers or disclaimers of jurisdiction from the Washington
    Utilities and Transportation Commission, the Idaho Public
    Utility Commission, the Montana Public Service Commission, the
    Oregon Public Utility Commission, the Federal Energy Regulatory
    Commission, and all other regulatory bodies, boards or agencies
    as are or may be required in connection with the Exchange and
    related transactions, which orders, authorizations, approvals,
    waivers A-2
    Table of Contents  and disclaimers shall remain in full force and effect, and shall
    not include, in the sole judgment of the Board of Director of
    Avista, unacceptable conditions;C. the effectiveness of a registration statement under the
    Securities Act of 1933, as amended, relating to AVA Common Stock
    to be issued in the Exchange;D. the approval by the New York Stock Exchange for the
    listing of the AVA Common Stock to be issued in the
    Exchange; andE. the receipt by Avista of a favorable opinion of Heller
    Ehrman LLP covering certain United States federal income tax
    matters. ARTICLE V Following the Effective Time, each holder of an outstanding
certificate or certificates that represented shares of Avista
Common Stock immediately prior to the Effective Time may, but
shall not be required to, surrender such certificates to
AVAs transfer agent for cancellation and reissuance of a
new certificate or certificates in such holders name or
for cancellation and transfer, and each such holder or
transferee shall be entitled to receive a certificate or
certificates representing the same number of shares of AVA
Common Stock as the shares of Avista Common Stock previously
represented by the certificate or certificates surrendered.
Until so surrendered or presented for exchange or transfer, each
outstanding certificate that, immediately prior to the Effective
Time, represented Avista Common Stock shall be deemed and shall
be treated for all purposes to represent the ownership of the
same number of shares of AVA Common Stock as though such
surrender or exchange or transfer had taken place. The holders
of Avista Common Stock at the Effective Time shall have no right
at and after the Effective Time to have any shares of Avista
Common Stock transferred on the stock transfer books of Avista
(such stock transfer books being deemed closed for this purpose
at the Effective Time), and each record of a holder of
outstanding certificate(s) that represented shares of Avista
Common Stock immediately prior to the Effective Time shall be
recorded as representing the ownership by such holder of the
same number of shares of AVA Common Stock in the stock transfer
books of AVA at the Effective Time. ARTICLE VI A. This Plan of Exchange may be amended, modified or
supplemented, or compliance with any provision of this Plan of
Exchange may be waived, at any time prior to the Effective Time
(including, without limitation, after receipt of the affirmative
vote of holders of Avista Common Stock as provided in
Article I above), by the mutual consent of the Boards of
Directors of Avista and AVA, so long as such amendment,
modification, supplement or waiver would not, in the sole
judgment of the Board of Directors of Avista, materially and
adversely affect the shareholders of Avista. B. This Plan of Exchange may be terminated and the Exchange
and related transactions abandoned at any time prior to the
Effective Time (including, without limitation, after receipt of
the affirmative vote of holders of Avista Common Stock as
provided in Article I above), if the Board of Directors of
Avista determines, in its sole judgment, that consummation of
the Exchange would for any reason be inadvisable or not in the
best interests of Avista or its shareholders. EXECUTED by each of the Companies, pursuant to authorization and
approval given by its Board of Directors, as of the date first
above written. AVISTA CORPORATION
    
    AVA FORMATION CORP.By:
    /s/ Gary G. Ely

    
    By:
    /s/ Gary G. ElyGary G. Ely

    
    
    Gary G. ElyIts Chairman, President & CEO

    

    
    Its President A-3
    Table of Contents  EXHIBIT B
 AMENDED AND RESTATED
 ARTICLES OF INCORPORATION
 OF
 AVA FORMATION CORP.*
 
  
 Authorized Capital
 Section
2.2 Article 2
 Issuance of Preferred Shares in Series
  Preemptive Rights
  
 *
    
    The name will be changed prior to the Effective Time of the Share Exchange. B-1
    Table of Contents  Number
 Section 4.5 Article 4
 Classification
  Vacancies
 Section 4.5
 Removal
  B-2
    Table of Contents  Directors Elected by Preferred Shares
  
 Article 5 Article X
 
 Article 3 Article 4 Article 5 Article 6
 
 Article 7
 
 Article 8 Article 8
 B-3
    Table of Contents  Marian M. DurkinVice President and Secretary B-4
    Table of Contents  EXHIBIT C AMENDED AND RESTATED BYLAWS OF
 AVA FORMATION CORP.*
 *****
 ARTICLE I. OFFICES The principal office of the Corporation initially shall be in
the City of Spokane, State of Washington. The Corporation may
move its principal office or have such other offices, either
within or without the State of Washington, as the Board of
Directors may determine from time to time. ARTICLE II. SHAREHOLDERS Section 1.     Annual
Meeting. The Annual Meeting of Shareholders for the election
of directors and transaction of such other business as may
properly come before the meeting shall be held on such date in
the month of May in each year as is determined by the Board of
Directors. Section 2.     Special
Meetings. Special meetings of the shareholders may be called
by the President, the Chairman of the Board of Directors, a
majority of the Board of Directors, and any Executive Committee
of the Board of Directors. A special meeting of the shareholders
shall be called by the Secretary upon receipt of written demands
for such a meeting from not less than two-thirds of all
outstanding shares of this corporation entitled to vote on any
matter proposed to be considered at the meeting. Section 3.     Place of
Meeting. Meetings of the shareholders, whether they be
annual or special, shall be held at the principal office of the
Corporation, unless a place, either within or without the State
of Washington, is otherwise designated in the meeting notice
provided to shareholders. Section 4.     Notice of
Meeting. Subject to the last sentence of this
Section 4, written or printed notice of every meeting of
shareholders shall be mailed by the Corporate Secretary or an
Assistant Corporate Secretary. Notice of a shareholders
meeting to act on an amendment to the articles of incorporation,
a plan of merger or share exchange, a proposed sale of assets
pursuant to Section 12.020 of Title 23B of the Revised
Code of Washington (as amended from time to time, the
Washington Business Corporation Act), or the
dissolution of the corporation shall be given not less than
twenty (20) nor more than sixty (60) days before the
date of the meeting to each holder of record of shares entitled
to vote at the meeting. Notice of all other shareholders
meetings shall be given not less than ten (10) nor more
than sixty (60) days before the date of the meeting. The
notice shall be mailed to each shareholder at such
shareholders last known post office address. If a
shareholder is present at a meeting without objection, or waives
notice of the meeting in writing before or after the meeting,
notice of the meeting shall be unnecessary with respect to that
shareholder. Section 5.     Voting of
Shares. At every meeting of shareholders, each share
entitled to vote on any issue to be considered at such meeting
shall be entitled to one vote. Subject to the provisions of the
Washington Business Corporation Act and the Articles of
Incorporation of the Corporation, as amended from time to time
(the Articles of Incorporation), shareholders
may vote and otherwise act in person or by proxy. In elections
of directors there shall be cumulative voting as provided in the
Washington Business Corporation Act.    * The name will be changed prior to the Effective Time of
    the Share Exchange. C-1
    Table of Contents  Section 6.     Quorum. A
majority of the number of outstanding shares of the Corporation
entitled to vote at the meeting, present in person or by proxy,
shall constitute a quorum. Shares constituting less than a
quorum shall have power to adjourn any meeting from time to time
without notice. Section 7.     Closing of Share
Transfer Records or Fixing of Record Date. For the purposes
of determining shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or
shareholders entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other
proper purpose, the Board of Directors of the Corporation may
provide that the share transfer records of the Corporation shall
be closed for a stated period not to exceed fifty
(50) days. If the share transfer records shall be closed
for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, such books shall be
closed for at least ten (10) days immediately preceding
such meeting. In lieu of closing the share transfer records, the
Board of Directors may fix in advance a date as the record date
for any such determination of shareholders, such date in any
case to be not more than seventy (70) days and, in case of
a meeting of shareholders, not less than ten (10) days
prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. When a
determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof. Section 8.     Voting
Record. The officer or agent having charge of the share
transfer records of the Corporation shall prepare, at least ten
(10) days before each meeting of shareholders, an
alphabetical list of the shareholders entitled to vote at such
meeting or any adjournment thereof, arranged by voting group,
and within each voting group, by class or series of shares, with
the address of and the number of shares held by each
shareholder. The shareholders list shall be made available
for inspection by any shareholder, the shareholders agent
or the shareholders attorney, beginning ten (10) days
prior to the meeting and continuing through the meeting, at the
corporations principal office or at a place identified in
the meeting notice in the city where the meeting will be held. Section 9.     Conduct of
Proceedings. The Chairman of the Board shall preside at all
meetings of the shareholders. In the absence of the Chairman,
the President shall preside and in the absence of both, the most
senior Vice President shall preside. The members of the Board of
Directors present at the meeting may appoint any officer of the
Corporation or member of the Board to act as Chairman of any
meeting in the absence of the Chairman, the President, or
Executive Vice President. The Corporate Secretary of the
Corporation, or in the Secretarys absence, an Assistant
Corporate Secretary, shall act as Secretary at all meetings of
the shareholders. In the absence of the Corporate Secretary or
Assistant Corporate Secretary at any meeting of the
shareholders, the presiding officer may appoint any person to
act as Secretary of the meeting. Section 10.     Proxies. At
all meetings of shareholders, a shareholder may vote in person
or by proxy. A shareholder or the shareholders duly
authorized agent or attorney-in-fact may appoint a proxy by
(i) executing a proxy in writing or (ii) transmitting
or authorizing the transmission of an electronic proxy in any
manner permitted by the Washington Business Corporation Act.
Such proxy shall be filed with the Corporate Secretary of the
Corporation before or at the time of the meeting. Section 11.     Advance Notice
of Business to be Presented at Annual Meeting.
(a) Shareholders may propose business to be brought before
the Annual Meeting of Shareholders only if (i) such
business is a proper matter for shareholder action under the
Washington Business Corporation Act and (ii) the
shareholder has given timely notice in proper written form of
such shareholders intent to propose such business. (b) To be timely, a shareholders notice relating to
the Annual Meeting shall be delivered to the Corporate Secretary
at the principal executive offices of the Corporation not less
than 120 or more than 180 days prior to the first
anniversary (the Anniversary) of the date on
which the Corporation first mailed its proxy materials for the
preceding years Annual Meeting of Shareholders. However,
if the date of the Annual Meeting is advanced more than
30 days prior to or delayed by more than 30 days after
the Anniversary of the preceding years Annual Meeting,
then notice by the shareholder to be timely must be delivered to
the Corporate Secretary at the principal executive offices of
the Corporation not later than the close of business on the
later of (i) the 90th day prior to such Annual Meeting
or (ii) the 15th day following the day on which C-2
    Table of Contents  (c) To be in proper form, a shareholders notice to
the Corporate Secretary shall be in writing and shall set forth
(i) the name and address of the shareholder who intends to
make the proposal and the classes and numbers of the
Corporations shares owned of record by such shareholder,
(ii) a representation that the shareholder intends to vote
such shares at such meeting, (iii) a description of the
business the shareholder intends to bring before the meeting,
including such information as would be required to be included
in a proxy statement filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended (the
Exchange Act), had the matter been proposed,
or intended to be proposed, by the Board of Directors of the
Corporation, (iv) the name and address of any beneficial
owner(s) of the Corporations shares on whose behalf such
business is to be presented and the class and number of shares
beneficially owned by each such beneficial owner (beneficial
ownership to be determined pursuant to Rule 13d-3 under the
Exchange Act), and (v) any material interest in such
business of such shareholder or any such beneficial owner. (d) Only such business as shall have been brought before
the meeting in accordance with the procedures set forth in this
Section 11 shall be conducted at an Annual Meeting of
Shareholders. The Chairman of the meeting shall have the power
and the duty to determine whether any business proposed to be
brought before a meeting was proposed in accordance with the
procedures set forth in this Section 11, and, if any
business is not in compliance with this Section, to declare that
such defective proposal shall be disregarded. The determination
of the Chairman shall be conclusive. (e) Notwithstanding the foregoing provisions of this
Section 11, a shareholder shall also comply with all
applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth in
this Section 11. Nothing in this Section shall be deemed to
expand or diminish any rights of a shareholder under
Rule 14a-8 under the Exchange Act, or any successor rule to
request inclusion of a proposal in the Corporations proxy
statement or to present for action at an Annual Meeting any
proposal so included. (f) Only such business as shall have been brought before
the meeting pursuant to the Corporations notice of meeting
shall be conducted at a special meeting of shareholders. ARTICLE III. BOARD OF DIRECTORS Section 1.     General
Powers. The powers of the Corporation shall be exercised by
or under the authority of, and the business and affairs of the
Corporation managed under the direction of, the Board of
Directors, subject to any limitation set forth in the Articles
of Incorporation. Section 2.     Number, Tenure
and Eligibility. The number of directors of the Corporation
is eleven (11). The directors shall be divided into three
classes, each class to be as nearly equal in number as possible.
The terms of the directors in the first class shall expire at
the first annual shareholders meeting after their
election, the terms of the directors in the second class shall
expire at the second annual shareholders meeting after
their election, and the terms of the directors in the third
class shall expire at the third annual shareholders
meeting after their election. At each annual shareholders
meeting held thereafter, the directors shall be chosen for terms
of three years to succeed those whose terms expire. All
directors shall hold office until the expiration of their
respective terms of office and until their successors shall have
been elected and qualified. No person may be elected or
re-elected as a director if, at the time of their election or
re-election, such person shall have attained the age of seventy
(70) years. Any director who attains such age while in
office shall retire from the Board of Directors effective at the
Annual Meeting of Shareholders held in the year in which their
then current term expires, and any such director shall not be
nominated or re-elected as a director. C-3
    Table of Contents  Section 3.     Regular
Meetings. The regular Annual Meeting of the Board of
Directors shall be held immediately following the adjournment of
the Annual Meeting of the shareholders or as soon as practicable
after said Annual Meeting of Shareholders. But, in any event,
said regular Annual Meeting of the Board of Directors must be
held on either the same day as the Annual Meeting of
Shareholders or the next business day following said Annual
Meeting of Shareholders. At such meeting the Board of Directors,
including directors newly elected, shall organize itself for the
coming year, shall elect officers of the Corporation for the
ensuing year, and shall transact all such further business as
may be necessary or appropriate. The Board shall hold regular
quarterly meetings, without call or notice, on such dates as
determined by the Board of Directors. At such quarterly meetings
the Board of Directors shall transact all business properly
brought before the Board. Section 4.     Special
Meetings. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board, the
President or any three (3) directors. Notice of any special
meeting shall be given to each director at least two
(2) days in advance of the meeting. Section 5.     Emergency
Meetings. In the event of a catastrophe or a disaster
causing the injury to or death of members of the Board of
Directors and the principal officers of the Corporation, any
director or officer may call an emergency meeting of the Board
of Directors. Notice of the time and place of the emergency meeting shall be
given not less than two (2) days prior to the meeting and
may be given by any available means of communication. The
director or directors present at the meeting shall constitute a
quorum for the purpose of filling vacancies determined to exist.
The directors present at the emergency meeting may appoint such
officers as necessary to fill any vacancies determined to exist.
All appointments under this Section 5 shall be temporary
until a special meeting of the shareholders and directors is
held as provided in these Bylaws. Section 6.     Conference by
Telephone. The members of the Board of Directors may
participate in a meeting of the Board of Directors by means of a
conference telephone or similar communication equipment by means
of which all persons participating in the meeting can hear and
communicate with each other at the same time. Participation in a
meeting by such means shall constitute presence in person at a
meeting. Section 7.     Quorum and
Voting. A majority of the number of directors shall
constitute a quorum for the transaction of business at any
meeting of the Board of Directors. The action of a majority of
the directors present at a meeting at which a quorum is present
shall be the action of the Board. Section 8.     Action Without a
Meeting. Any action required by the Washington Business
Corporation Act to be taken at a meeting of the Board of
Directors of the Corporation, or any action which may be taken
at a meeting of the Board of Directors, may be taken without a
meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the directors. Such consent
shall have the same effect as a unanimous vote. Section 9.     Vacancies.
Subject to the Articles of Incorporation, any vacancy occurring
in the Board of Directors may be filled by the affirmative vote
of a majority of the remaining directors though less than a
quorum of the Board of Directors. Any director so elected to
fill a vacancy shall be elected for the unexpired term of his or
her predecessor in office. Any directorship to be filled by
reason of an increase in the number of directors may be filled
by the Board of Directors or, if applicable, one or more series
of preferred shares, for a term of office continuing only until
the next election of directors by the shareholders. Section 10.     Resignation of
Director. Any director may resign at any time. Such
resignation shall be made in writing and shall take effect at
the time specified therein. If no time is specified, it shall
take effect from the time of its receipt by the Corporate
Secretary, who shall record such resignation, noting the day,
hour and minute of its reception. The acceptance of a
resignation shall not be necessary to make it effective. Section 11.     Removal.
Any director may be removed from office at any time, but only
for cause and only by the affirmative vote of at least a
majority of all of the shares of this corporation entitled
generally to vote in the election of directors (the
Voting Shares), voting together as a single
class, at a meeting of shareholders called expressly for that
purpose. If less than the entire Board of Directors is to be
removed, no one of the directors may be removed if the votes
cast against the removal of such director would be sufficient C-4
    Table of Contents  Section 12.     Order of
Business. The Chairman of the Board shall preside at all
meetings of the directors. In the absence of the Chairman, the
officer or member of the Board designated by the Board of
Directors shall preside. At meetings of the Board of Directors,
business shall be transacted in such order as the Board may
determine. Minutes of all proceedings of the Board of Directors
shall be prepared and maintained by the Corporate Secretary or
an Assistant Corporate Secretary and the original shall be
maintained in the principal office of the Corporation. Section 13.     Nomination of
Directors. Nominations for the election of directors may be
made by the Board of Directors, or a nominating committee
appointed by the Board of Directors, or by any holder of Voting
Shares. However, any holder of Voting Shares may nominate one or
more persons for election as directors at a meeting only if
written notice of such shareholders intent to make such
nomination or nominations has been given, either by personal
delivery or by United States mail, postage prepaid, to the
Corporate Secretary not later than (i) with respect to an
election to be held at an Annual Meeting of Shareholders, ninety
(90) days in advance of such meeting and (ii) with
respect to an election to be held at a special meeting of
shareholders for the election of directors, the close of
business on the seventh day following the date on which notice
of such meeting is first given to shareholders. Each such notice
shall set forth (a) the name and address of the shareholder
who intends to make the nomination and of the person or persons
to be nominated; (b) a representation that such shareholder
is a holder of record of Voting Shares of the Corporation and
intends to appear in person or by proxy at the meeting to
nominate the person or persons identified in the notice;
(c) a description of all arrangements or understandings
between such shareholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by such shareholder;
(d) such other information regarding each nominee proposed
by such shareholder as would be required to be included in a
proxy statement under the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (or any
subsequent revisions replacing such Act, rules or regulations)
if the nominee(s) had been nominated, or were intended to be
nominated, by the Board of Directors; and (e) the consent
of each nominee to serve as a Director of the Corporation if so
elected. The Chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the
foregoing procedure. Section 14.     Presumption of
Assent. A director of the Corporation who is present at a
meeting of the Board of Directors at which action on any
corporate matter is taken, shall be presumed to have assented to
the action unless the directors dissent shall be entered
in the minutes of the meeting or unless the director shall file
his or her written dissent to such action with the person acting
as the Secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the
Corporate Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not
apply to a director who voted in favor of such action. ARTICLE IV. COMMITTEES OF THE BOARD OF DIRECTORS Section 1.     Appointment.
The Board of Directors may, by resolution adopted by a majority
of the entire Board of Directors, designate from among its
members one or more committees. Each such committee shall
consist of two (2) or more of the directors of the
Corporation, except that any Executive Committee shall consist
of three (3) or more directors. A majority of the members
of any such committee may determine its action and fix the time
and place of its meetings unless the Board of Directors shall
otherwise provide. Section 2.     Authority.
The Executive Committee, when the Board of Directors is not in
session, shall have and may exercise all of the authority of the
Board of Directors including authority to authorize
distributions or the issuance of shares, except to the extent,
if any, that such authority shall be limited by the resolution
appointing the Executive Committee or by the Washington Business
Corporation Act. Any other committee, to the extent granted in
the applicable resolution, shall have all the authority of the
Board of C-5
    Table of Contents  Section 3.     Tenure. Each
member of the Executive Committee shall hold office until the
next regular Annual Meeting of the Board of Directors following
designation as a member of the Executive Committee and until a
successor has been designated. Members of any other committees
shall serve at the pleasure of the Board of Directors. Section 4.     Meetings.
Regular meetings of any committee may be held without notice at
such times and places as the committee may fix from time to time
by resolution. Any member of a committee may call a special
meeting upon not less than two (2) days notice stating the
place, date and hour of the meeting, which notice may be written
or oral. Any member of a committee may waive notice of any
meeting and no notice of any meeting need be given to any
committee member who attends in person. Section 5.     Quorum and
Voting. A quorum for the transaction of business at any
meeting of a committee of the board of directors consists of a
majority of the members of such committee. The action of a
majority of the members of a committee present at a meeting at
which a quorum is present shall be the action of the committee,
except that any action taken by the Executive Committee must be
authorized by the affirmative vote of a majority of its
appointed members. Section 6.     Action Without a
Meeting. Any action required or permitted to be taken by a
committee at a meeting may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be
signed by all of the members of the committee. Such consent
shall have the same effect as a unanimous vote. Section 7.     Presumption of
Asset. A member of a committee who is present at a committee
meeting at which action on any corporate matter is taken, shall
be presumed to have assented to the action unless the
directors dissent shall be entered in the minutes of the
meeting or unless the director shall file his or her written
dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Corporate Secretary of
the Corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a member of
the committee who voted in favor of such action. Section 8.     Procedure.
Each committee designated by the Board of Directors shall, to
the extent not specified by the Board of Directors, select a
presiding officer from its members and may fix its own rules of
procedure, which shall not be inconsistent with these Bylaws. It
shall keep regular minutes of its proceedings and report the
same to the Board of Directors for its information at a meeting
thereof held next after the proceedings shall have been taken. ARTICLE V. OFFICERS Section 1.     Number. The
Board of Directors shall appoint one of its members Chairman of
the Board. The Board of Directors shall also appoint a Chief
Executive Officer and a President, one of whom may also serve as
Chairman, one or more Vice Presidents (with such relative rank
and title as the Board may determine), a Corporate Secretary,
and a Treasurer. The Board of Directors may from time to time
appoint such other officers as the Board deems appropriate. The
same person may be appointed to more than one office. The Chief
Executive Officer shall have the authority to appoint such other
officers, including assistant officers, as might be deemed
appropriate. Section 2.     Election and
Term of Office. The officers of the Corporation shall be
elected by the Board of Directors at the Annual Meeting of the
Board. Each officer shall hold office until his or her successor
shall have been duly elected and qualified. Section 3.     Removal. The
Board of Directors may remove any officer or agent at any time
if, in its judgment, such removal is in the best interests of
the Corporation. The Chief Executive Officer may remove C-6
    Table of Contents  Section 4.     Vacancies. A
vacancy in any office because of death, resignation, removal,
disqualification or otherwise may be filled by the Board of
Directors for the unexpired portion of the term. Section 5.     Powers and
Duties. The officers shall have such powers and duties as
usually pertain to their offices, except as modified by the
Board of Directors, and shall have such other powers and duties
as may from time to time be conferred upon them by the Board of
Directors. ARTICLE VI. CONTRACTS, CHECKS AND DEPOSITS Section 1.     Contracts.
The Board of Directors may authorize any officer or officers or
agents, to enter into any contract or to execute and deliver any
instrument in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances. Section 2.     Checks/ Drafts/
Notes. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner
as shall from time to time be determined by resolution of the
Board of Directors. Section 3.     Deposits.
All funds of the Corporation not otherwise employed shall be
deposited from time to time to the credit of the Corporation in
such banks, trust companies or other depositories as the Board
of Directors by resolution may select. ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER Section 1.     Certificates for
Shares. Certificates representing shares of the Corporation
shall be in such form as shall be determined by the Board of
Directors and shall contain such information as prescribed by
the Washington Business Corporation Act. Such certificates shall
be signed by the President or a Vice President and by either the
Corporate Secretary or an Assistant Corporate Secretary, and
sealed with the corporate seal or a facsimile thereof. The
signatures of such officers upon a certificate may be
facsimiles. The name and address of the person to whom the
shares represented thereby are issued, with the number of shares
and date of issue, shall be entered on the share transfer
records of the Corporation. All certificates surrendered to the
Corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a
like number of shares shall have been surrendered and cancelled,
except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms and
indemnity to the Corporation as the Board of Directors may
prescribe. Section 2.     Transfer of
Shares. Transfer of shares of the Corporation shall be made
only on the share transfer records of the Corporation by the
holder of record of such shares or by such holders legal
representative, who shall furnish proper evidence of authority
to transfer, or such holders attorney authorized by power
of attorney duly executed and filed with the Corporate Secretary
of the Corporation, and on surrender for cancellation of the
certificate for such shares. The person in whose name shares
stand on the share transfer records of the Corporation shall be
deemed by the Corporation to be the owner of such shares for all
purposes. The Board of Directors shall have the power to appoint
one or more transfer agents and registrars for transfer and
registration of certificates of shares. C-7
    Table of Contents  ARTICLE VIII. CORPORATE SEAL The seal of the Corporation shall be in such form as the Board
of Directors shall prescribe. ARTICLE IX. INDEMNIFICATION Section 1.     Indemnification
of Directors and Officers. The Corporation shall indemnify,
defend and reimburse the expenses of any person who is or was a
director or officer of the Corporation or, while serving in such
capacity, is or was also serving at the request of the
Corporation as a director, officer, partner, trustee, employee,
or agent of another enterprise or employee benefit plan, all to
the extent permitted by and in accordance with Article 8 of
the Articles of Incorporation and the Washington Business
Corporation Act. Section 2.     Liability
Insurance. The Corporation shall have the power to purchase
and maintain insurance on behalf of any person who is or was a
director, officer, employee, or agent of the Corporation or is
or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust, other enterprise, or employee benefit plan
(each an Indemnified Person) against any
liability asserted against such Indemnified Person and incurred
by him or her or arising out of his or her status as an
Indemnified Person, whether or not the Corporation would have
the power to indemnify him or her against such liability under
the laws of the State of Washington. Section 3.     Ratification of
Acts of Director, Officer or Shareholder. Any transaction
questioned in any shareholders derivative suit on the
ground of lack of authority, defective or irregular execution,
adverse interest of director, officer or shareholder,
nondisclosure, miscomputation, or the application of improper
principles or practices of accounting may be ratified before or
after judgment, by the Board of Directors or by the shareholders
in case less than a quorum of directors are qualified; and, if
so ratified, shall have the same force and effect as if the
questioned transaction had been originally duly authorized, and
said ratification shall be binding upon the Corporation and its
shareholders and shall constitute a bar to any claim or
execution of any judgment in respect of such questioned
transaction. ARTICLE X. AMENDMENTS Section 2 of Article III (other than the provision
thereof specifying the number of Directors of the Corporation),
Sections 9, 11 and 13 of Article III, and this
sentence shall not be altered, amended or repealed, and no
provision inconsistent therewith or herewith shall be included
in these Bylaws, without the affirmative votes of the holders of
not less than two-thirds ( 2/3rds) of all outstanding shares of
each voting group of this corporation entitled generally to vote
in the election of directors. Otherwise, to the extent permitted
by the Articles of Incorporation and except as to Section 6
of Article II of these Bylaws, the Board of Directors may
alter or amend these Bylaws at any meeting duly held, the notice
of which includes notice of the proposed amendment. Bylaws
adopted by the Board of Directors shall be subject to change or
repeal by the shareholders. C-8
    Table of Contents  EXHIBIT D DISSENTERS RIGHTS Revised Code of Washington (RCW) Sections: 23B.13.010 Definitions. 23B.13.020 Right to dissent. 23B.13.030 Dissent by nominees and beneficial owners. 23B.13.200 Notice of dissenters rights. 23B.13.210 Notice of intent to demand payment. 23B.13.220 Dissenters rights  Notice. 23B.13.230 Duty to demand payment. 23B.13.240 Share restrictions. 23B.13.250 Payment. 23B.13.260 Failure to take action. 23B.13.270 After-acquired shares. 23B.13.280 Procedure if shareholder dissatisfied with payment or
offer. 23B.13.300 Court action. 23B.13.310 Court costs and counsel fees. 23B.13.010  Definitions. As used in this chapter:  (1) Corporation means the issuer of the
    shares held by a dissenter before the corporate action, or the
    surviving or acquiring corporation by merger or share exchange
    of that issuer.(2) Dissenter means a shareholder who is
    entitled to dissent from corporate action under
    RCW 23B.13.020 and who exercises that right when and in the
    manner required by RCW 23B.13.200 through 23B.13.280.(3) Fair value, with respect to a
    dissenters shares, means the value of the shares
    immediately before the effective date of the corporate action to
    which the dissenter objects, excluding any appreciation or
    depreciation in anticipation of the corporate action unless
    exclusion would be inequitable.(4) Interest means interest from the
    effective date of the corporate action until the date of
    payment, at the average rate currently paid by the corporation
    on its principal bank loans or, if none, at a rate that is fair
    and equitable under all the circumstances.(5) Record shareholder means the person
    in whose name shares are registered in the records of a
    corporation or the beneficial owner of shares to the extent of
    the rights granted by a nominee certificate on file with a
    corporation.(6) Beneficial shareholder means the
    person who is a beneficial owner of shares held in a voting
    trust or by a nominee as the record shareholder.(7) Shareholder means the record
    shareholder or the beneficial shareholder. D-1
    Table of Contents  23B.13.020  Right to dissent. (1) A shareholder is entitled to dissent from, and obtain
payment of the fair value of the shareholders shares in
the event of, any of the following corporate actions:  (a) Consummation of a plan of merger to which the
    corporation is a party (i) if shareholder approval is
    required for the merger by RCW 23B.11.030, 23B.11.080, or the
    articles of incorporation, and the shareholder is entitled to
    vote on the merger, or (ii) if the corporation is a
    subsidiary that is merged with its parent under RCW 23B.11.040;(b) Consummation of a plan of share exchange to which the
    corporation is a party as the corporation whose shares will be
    acquired, if the shareholder is entitled to vote on the plan;(c) Consummation of a sale or exchange of all, or
    substantially all, of the property of the corporation other than
    in the usual and regular course of business, if the shareholder
    is entitled to vote on the sale or exchange, including a sale in
    dissolution, but not including a sale pursuant to court order or
    a sale for cash pursuant to a plan by which all or substantially
    all of the net proceeds of the sale will be distributed to the
    shareholders within one year after the date of sale;(d) An amendment of the articles of incorporation, whether
    or not the shareholder was entitled to vote on the amendment, if
    the amendment effects a redemption or cancellation of all of the
    shareholders shares in exchange for cash or other
    consideration other than shares of the corporation; or(e) Any corporate action taken pursuant to a shareholder
    vote to the extent the articles of incorporation, bylaws, or a
    resolution of the board of directors provides that voting or
    nonvoting shareholders are entitled to dissent and obtain
    payment for their shares. (2) A shareholder entitled to dissent and obtain payment
for the shareholders shares under this chapter may not
challenge the corporate action creating the shareholders
entitlement unless the action fails to comply with the
procedural requirements imposed by this title, RCW 25.10.900
through 25.10.955, the articles of incorporation, or the bylaws,
or is fraudulent with respect to the shareholder or the
corporation. (3) The right of a dissenting shareholder to obtain payment
of the fair value of the shareholders shares shall
terminate upon the occurrence of any one of the following events:  (a) The proposed corporate action is abandoned or rescinded;(b) A court having jurisdiction permanently enjoins or sets
    aside the corporate action; or(c) The shareholders demand for payment is withdrawn
    with the written consent of the corporation. 23B.13.030  Dissent by nominees and beneficial owners. (1) A record shareholder may assert dissenters rights
as to fewer than all the shares registered in the
shareholders name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and
delivers to the corporation a notice of the name and address of
each person on whose behalf the shareholder asserts
dissenters rights. The rights of a partial dissenter under
this subsection are determined as if the shares as to which the
dissenter dissents and the dissenters other shares were
registered in the names of different shareholders. (2) A beneficial shareholder may assert dissenters
rights as to shares held on the beneficial shareholders
behalf only if:  (a) The beneficial shareholder submits to the corporation
    the record shareholders consent to the dissent not later
    than the time the beneficial shareholder asserts
    dissenters rights, which consent shall be set forth either
    (i) in a record or (ii) if the corporation has
    designated an address, location, or system to D-2
    Table of Contents  which the consent may be electronically transmitted and the
    consent is electronically transmitted to the designated address,
    location, or system, in an electronically transmitted
    record; and(b) The beneficial shareholder does so with respect to all
    shares of which such shareholder is the beneficial shareholder
    or over which such shareholder has power to direct the vote. 23B.13.200  Notice of dissenters rights. (1) If proposed corporate action creating dissenters
rights under RCW 23B.13.020 is submitted to a vote at a
shareholders meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters
rights under this chapter and be accompanied by a copy of this
chapter. (2) If corporate action creating dissenters rights
under RCW 23B.13.020 is taken without a vote of shareholders,
the corporation, within ten days after the effective date of
such corporate action, shall deliver a notice to all
shareholders entitled to assert dissenters rights that the
action was taken and send them the notice described in RCW
23B.13.220. 23B.13.210  Notice of intent to demand payment. (1) If proposed corporate action creating dissenters
rights under RCW 23B.13.020 is submitted to a vote at a
shareholders meeting, a shareholder who wishes to assert
dissenters rights must (a) deliver to the corporation
before the vote is taken notice of the shareholders intent
to demand payment for the shareholders shares if the
proposed action is effected, and (b) not vote such shares
in favor of the proposed action. (2) A shareholder who does not satisfy the requirements of
subsection (1) of this section is not entitled to
payment for the shareholders shares under this chapter. 23B.13.220  Dissenters rights  Notice. (1) If proposed corporate action creating dissenters
rights under RCW 23B.13.020 is authorized at a
shareholders meeting, the corporation shall deliver a
notice to all shareholders who satisfied the requirements of RCW
23B.13.210. (2) The notice must be sent within ten days after the
effective date of the corporate action, and must:  (a) State where the payment demand must be sent and where
    and when certificates for certificated shares must be deposited;(b) Inform holders of uncertificated shares to what extent
    transfer of the shares will be restricted after the payment
    demand is received;(c) Supply a form for demanding payment that includes the
    date of the first announcement to news media or to shareholders
    of the terms of the proposed corporate action and requires that
    the person asserting dissenters rights certify whether or
    not the person acquired beneficial ownership of the shares
    before that date;(d) Set a date by which the corporation must receive the
    payment demand, which date may not be fewer than thirty nor more
    than sixty days after the date the notice in
    subsection (1) of this section is delivered; and(e) Be accompanied by a copy of this chapter. D-3
    Table of Contents  23B.13.230  Duty to demand payment. (1) A shareholder sent a notice described in RCW 23B.13.220
must demand payment, certify whether the shareholder acquired
beneficial ownership of the shares before the date required to
be set forth in the notice pursuant to RCW 23B.13.220(2)(c), and
deposit the shareholders certificates, all in accordance
with the terms of the notice. (2) The shareholder who demands payment and deposits the
shareholders share certificates under
subsection (1) of this section retains all other
rights of a shareholder until the proposed corporate action is
effected. (3) A shareholder who does not demand payment or deposit
the shareholders share certificates where required, each
by the date set in the notice, is not entitled to payment for
the shareholders shares under this chapter. 23B.13.240  Share restrictions. (1) The corporation may restrict the transfer of
uncertificated shares from the date the demand for their payment
is received until the proposed corporate action is effected or
the restriction is released under RCW 23B.13.260. (2) The person for whom dissenters rights are
asserted as to uncertificated shares retains all other rights of
a shareholder until the effective date of the proposed corporate
action. 23B.13.250  Payment. (1) Except as provided in RCW 23B.13.270, within thirty
days of the later of the effective date of the proposed
corporate action, or the date the payment demand is received,
the corporation shall pay each dissenter who complied with RCW
23B.13.230 the amount the corporation estimates to be the fair
value of the shareholders shares, plus accrued interest. (2) The payment must be accompanied by:  (a) The corporations balance sheet as of the end of a
    fiscal year ending not more than sixteen months before the date
    of payment, an income statement for that year, a statement of
    changes in shareholders equity for that year, and the
    latest available interim financial statements, if any;(b) An explanation of how the corporation estimated the
    fair value of the shares;(c) An explanation of how the interest was calculated;(d) A statement of the dissenters right to demand
    payment under RCW 23B.13.280; and(e) A copy of this chapter. 23B.13.260  Failure to take action. (1) If the corporation does not effect the proposed action
within sixty days after the date set for demanding payment and
depositing share certificates, the corporation shall return the
deposited certificates and release any transfer restrictions
imposed on uncertificated shares. (2) If after returning deposited certificates and releasing
transfer restrictions, the corporation wishes to undertake the
proposed action, it must send a new dissenters notice
under RCW 23B.13.220 and repeat the payment demand procedure. D-4
    Table of Contents  23B.13.270  After-acquired shares. (1) A corporation may elect to withhold payment required by
RCW 23B.13.250 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the
dissenters notice as the date of the first announcement to
news media or to shareholders of the terms of the proposed
corporate action. (2) To the extent the corporation elects to withhold
payment under subsection (1) of this section, after
taking the proposed corporate action, it shall estimate the fair
value of the shares, plus accrued interest, and shall pay this
amount to each dissenter who agrees to accept it in full
satisfaction of the dissenters demand. The corporation
shall send with its offer an explanation of how it estimated the
fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenters right to
demand payment under RCW 23B.13.280. 23B.13.280  Procedure if shareholder dissatisfied with payment or
    offer. (1) A dissenter may deliver a notice to the corporation
informing the corporation of the dissenters own estimate
of the fair value of the dissenters shares and amount of
interest due, and demand payment of the dissenters
estimate, less any payment under RCW 23B.13.250, or reject the
corporations offer under RCW 23B.13.270 and demand
payment of the dissenters estimate of the fair value of
the dissenters shares and interest due, if:  (a) The dissenter believes that the amount paid under RCW
    23B.13.250 or offered under RCW 23B.13.270 is less than the
    fair value of the dissenters shares or that the interest
    due is incorrectly calculated;(b) The corporation fails to make payment under RCW
    23B.13.250 within sixty days after the date set for demanding
    payment; or(c) The corporation does not effect the proposed action and
    does not return the deposited certificates or release the
    transfer restrictions imposed on uncertificated shares within
    sixty days after the date set for demanding payment. (2) A dissenter waives the right to demand payment under
this section unless the dissenter notifies the corporation of
the dissenters demand under subsection (1) of
this section within thirty days after the corporation made or
offered payment for the dissenters shares. 23B.13.300  Court action. (1) If a demand for payment under RCW 23B.13.280 remains
unsettled, the corporation shall commence a proceeding within
sixty days after receiving the payment demand and petition the
court to determine the fair value of the shares and accrued
interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded. (2) The corporation shall commence the proceeding in the
superior court of the county where a corporations
principal office, or, if none in this state, its registered
office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose shares
were acquired by the foreign corporation was located. (3) The corporation shall make all dissenters, whether or
not residents of this state, whose demands remain unsettled,
parties to the proceeding as in an action against their shares
and all parties must be served D-5
    Table of Contents  (4) The corporation may join as a party to the proceeding
any shareholder who claims to be a dissenter but who has not, in
the opinion of the corporation, complied with the provisions of
this chapter. If the court determines that such shareholder has
not complied with the provisions of this chapter, the
shareholder shall be dismissed as a party. (5) The jurisdiction of the court in which the proceeding
is commenced under subsection (2) of this section is
plenary and exclusive. The court may appoint one or more persons
as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The
dissenters are entitled to the same discovery rights as parties
in other civil proceedings. (6) Each dissenter made a party to the proceeding is
entitled to judgment (a) for the amount, if any, by which
the court finds the fair value of the dissenters shares,
plus interest, exceeds the amount paid by the corporation, or
(b) for the fair value, plus accrued interest, of the
dissenters after-acquired shares for which the corporation
elected to withhold payment under RCW 23B.13.270. 23B.13.310  Court costs and counsel fees. (1) The court in a proceeding commenced under RCW
23B.13.300 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against
the corporation, except that the court may assess the costs
against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters
acted arbitrarily, vexatiously, or not in good faith in
demanding payment under RCW 23B.13.280. (2) The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the
court finds equitable:  (a) Against the corporation and in favor of any or all
    dissenters if the court finds the corporation did not
    substantially comply with the requirements of RCW 23B.13.200
    through 23B.13.280; or(b) Against either the corporation or a dissenter, in favor
    of any other party, if the court finds that the party against
    whom the fees and expenses are assessed acted arbitrarily,
    vexatiously, or not in good faith with respect to the rights
    provided by chapter 23B.13 RCW. (3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should
not be assessed against the corporation, the court may award to
these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited. D-6
    Table of Contents  PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
 
 
 Item 21. Exhibits and Financial Statement Schedules.
 Exhibits
  Financial Statements
  Opinion or report pursuant to item 4(b) if not part of prospectus
  Item 22. Undertakings.
 
  
 
 bona fide
    Table of Contents  SIGNATURES
 
  
 AVA FORMATION CORP.By:
    
    /s/ Marian M. DurkinMarian M. DurkinVice President and Corporate Secretary
  Signature
    
    Title
    
    Date*
    
    Chairman of the Board and PresidentGary G. Ely
    
    (Principal Executive Officer)
    
    March 23, 2006*
    
    Director, Vice President and Chief Financial OfficerMalyn K. Malquist
    
    (Principal Financial and
Accounting Officer)
    
    March 23, 2006/s/ Marian M. Durkin
    
    Director, Vice President andMarian M. Durkin
    
    Corporate Secretary
    
    March 23, 2006
 *By
    
    /s/ Marian M. DurkinMarian M. DurkinAttorney-in-Fact
    Table of Contents  EXHIBIT INDEX
 Exhibit
    
    Description of Exhibit23(b)
    
    Consent of Deloitte & Touche LLP99(a)
    
    Forms of Proxy99(b)
    
    Consents of Persons to become Directors