(b) Donating conversion shares or conversion proceeds to a charitable organization. Some of the conversion shares or proceeds may be contributed to a charitable organization if:

1. (1) The plan of conversion provides for the proposed contribution;
2. (2) The members approve the proposed contribution; and
3. (3) The IRS either has approved, or approves within two years after formation, the charitable organization as a tax-exempt charitable organization under the Internal Revenue Code.

(e) Charitable organization requirements. The charitable organization's charter (or trust agreement) and gift instrument must provide that:

1. (1) The charitable organization's primary purpose is to serve and make grants in the local community;
2. (2) As long as the charitable organization controls shares, it must vote those shares in the same ratio as all other shares voted on each proposal considered by the shareholders;
3. (3) For at least five years after its organization, one seat on the charitable organization's board of directors (or board of trustees) is reserved for an independent director (or trustee) from the local community. This director may not be the officer, director, or employee, or the affiliate's officer, director, or employee, and should have experience with local community charitable organizations and grant making; and
4. (4) For at least five years after its organization, one seat on the charitable organization's board of directors (or board of trustees) is reserved for a director from the board of directors or the board of directors of an acquiror or resulting institution in the event of a merger or acquisition of the organization.
5. (5) The Board may examine the charitable organization at the charitable organization's expense;
6. (6) The charitable organization must comply with all supervisory directives that the Board imposes;
7. (7) The charitable organization must annually provide the Board with a copy of the annual report that the charitable organization submitted to the IRS;
8. (8) The charitable organization must operate according to written policies adopted by its board of directors (or board of trustees), including a conflict of interest policy; and
9. (9) The charitable organization may not engage in self-dealing, and must comply with all laws necessary to maintain its tax-exempt status under the Internal Revenue Code.

(f) Conflicts of interest involving the directors of the mutual holding company or resulting stock holding company.

1. (1) An individual who is the director, officer, or employee, or a person who has the power to direct the management or policies, or otherwise owes a fiduciary duty to the mutual holding company or resulting stock holding company and who will serve as an officer, director, or employee of the charitable organization, is subject to the following obligations:

   1. (i) The individual must not advance their own personal or business interests, or those of others with whom the individual has a personal or business relationship, at the expense of the mutual holding company or resulting stock holding company;

   2. (ii) If the individual has an interest in a matter or transaction before the board of directors, the individual must:

      1. (A) Disclose to the board all material nonprivileged information relevant to the board's decision on the matter or transaction, including the existence, nature and extent of the individual's interests, and the facts known to the individual as to the matter or transaction under consideration;
      2. (B) Refrain from participating in the board's discussion of the matter or transaction; and
      3. (C) Recuse themselves from voting on the matter or transaction (if the individual is a director). See Form AC, which provides further information or operating plans and conflict of interest plans. The mutual holding company may obtain Form AC from the appropriate Reserve Bank and the Board's Web site at http://www.federalreserve.gov.
2. (2) Before the board of directors may adopt a plan of conversion that includes a charitable organization, the mutual holding company must identify the directors that will serve on the charitable organization's board. These directors may not participate in the board's discussions concerning contributions to the charitable organization, and may not vote on the matter.
3. (3) The stock certificates of shares contributed to the charitable organization or that the charitable organization otherwise acquires must bear the following legend: “The board of directors must consider the shares that this stock certificate represents as voted in the same ratio as all other shares voted on each proposal considered by the shareholders, as long as the shares are controlled by the charitable organization.”
4. (4) As long as the charitable organization controls shares, the resulting stock holding company must consider those shares as voted in the same ratio as all of the shares voted on each proposal considered by the shareholders.
5. (5) After the stock offering is complete, the resulting stock holding company must submit an executed copy of the following documents to the appropriate Reserve Bank: the charitable organization's charter and bylaws (or trust agreement), operating plan (within six months after the stock offering), conflict of interest policy, and the gift instrument for the contributions of either stock or cash to the charitable organization.