I followed some strings on here and i thought i had it figured out but for some reason my formula logic is not working.  This is what i am looking to do:

Fields: Type (pick list):  "New Business" or "Existing Business"

             Stage (picklist): "Proposal/Quotation"

             Spec Sheet Reviewed by Eng.? (Check Box)

Desired logic:  If Type = Existing Business, validation rule never returns an error.

                           If Type = New Business, validation rule checks the following when the stage is changed to "proposal/quotation:

                                        Spec Sheet Reviewed by Eng.? = True  (Validation rule returns no error)

                                        Spec Sheet Reviewed by Eng.? = False (Validation rule returns error)

So the requirements to return an error must be: first check to see if the stage is being changed to "proposal/quotation" and if this is true check to see what the type is set at.  If it is existing business, return no error regardless of the "spec sheet reviewed by eng.?" checkbox.  If it is New business, check to see if "Spec sheet reviewed by eng.?" is checked or not.  If not checked, return error.  If checked, return no error.

Here is what i have so far and thought it was working but it return an error when i select the check box when it shouldnt:

IF(AND(ISPICKVAL(StageName, "Proposal/Price Quote"), ISPICKVAL( Type , "New Business")), Requirements_Spec_Sheet_Reviewed_by_Eng__c =FALSE,(Requirements_Spec_Sheet_Reviewed_by_Eng__c=TRUE))