APA template architecture — the 16-article structure that runs every agency asset sale.

The APA template is not a contract; it is a scaffold. Every agency APA in the industry runs the same sixteen articles with the same fifteen-plus schedules. Sellers who understand the scaffolding arrive at closing knowing what each section does, what each schedule covers, and where the operational risks live. Sellers who don't are reacting to a buyer-drafted document instead of negotiating it.

§ 01 · The 16-article structureWhat each article covers.

Article 1 — Definitions. Foundational terms: Book of Business, Fixed Assets, Excluded Assets, Intangible Assets, Effective Date, Agency Business Assets. Article 2 — Purchase and Sale. Price, payment mechanics, closing logistics. Promissory Note + Unconditional Guaranty + Security Agreement for any seller-financed portion. Article 3 — Carrier Receivables, Payables, Contingency Income. Income cutoff rules (see §03 below). Article 4 — Expenses. Seller responsible for all pre-closing compensation, commissions, bonuses, unused vacation/sick leave. Article 5 — No Liabilities. Buyer does not assume any seller debt, obligation, or liability except those explicitly listed in Schedule 5.

Article 6 — Seller's Representations and Warranties. 15 specific R&Ws including organization and standing, interest in assets, compliance with laws, accuracy of statements, no defaults, taxes paid, absence of material adverse change, accounts payable current, E&O coverage, financial statements fairly present position, renewal commissions free of third-party claims, all contracts disclosed, solvency. Article 7 — Buyer's Representations. 5 R&Ws: organization, absence of restrictions, no pending litigation, no brokerage fees, full disclosure.

Article 8 — Covenants of the Seller. Confidentiality, policyholder notification, cooperation with carrier forms, no existing employee non-competes, no carrier contract modifications, Covenant Not to Compete (allocated dollar amount, terminates if buyer defaults on Note), conduct of business pre-closing, access to records, E&O tail coverage (5-year extended discovery), transfer of agency name. Article 9 — Conditions Precedent. 13 buyer conditions and 2 seller conditions. Article 10 — Transition. Seller and shareholder assist buyer with orderly transfer.

Articles 11–16 cover survival (2 years for R&Ws), indemnification (bilateral), general provisions, termination (material breach with 30-day cure), arbitration (binding under state law), and integration.

§ 02 · The schedules checklistThe operational backbone.

The schedules are deal-specific data filling the template. Schedule 1.2 (Book of Business — complete policy listing). Schedule 1.3 (Fixed Assets inventory). Schedule 1.4 (Excluded Assets). Schedule 1.5 (Supplies & Inventory). Schedule 2.3 (Promissory Note). Schedule 2.3(b)(1) (Unconditional Guaranty). Schedule 2.3(b)(2) (Security Agreement — UCC-1 filing). Schedule 5 (Assumed Contracts). Schedule 6.1 (Board / Shareholder Resolutions). Schedule 6.2 (Existing Liens). Schedule 6.10 (E&O Certificate). Schedule 7.1 (Buyer Resolutions). Schedule 8.5 (New Carrier Contracts). Schedule 8.9 (Extended Discovery E&O — 5-year tail). Schedule 9.1(f) (Bill of Sale). Schedule 9.1(m) (Office Lease).

§ 03 · Income cutoff rulesThe mechanics that move six figures.

Agency-Billed Policies. Effective Date on or after the Closing Date → income and carrier-payable liability belong to the Buyer. Effective Date before the Closing Date → income and liability belong to the Seller. Individual installments follow the same logic. Audits and endorsements: by date received.

Direct-Bill Commissions. Commissions received on or after the Closing Date are the Buyer's income. This is a receipt-date rule, not an effective-date rule.

Contingency Income. All contingency commissions, bonuses, and awards received on or after the Closing Date are the Buyer's income. This means the buyer can capture contingency income earned during the seller's operational period if the carrier pays after closing — a meaningful allocation question.

§ 04 · Seller note security mechanismsThe three protections that matter.

When the APA includes seller financing, the seller needs security to protect against buyer default. UCC-1 Security Interest. The Security Agreement grants the seller a first-priority security interest in the acquired Agency Business Assets. The seller files a UCC-1 financing statement to perfect this lien. Unconditional Guaranty. Personal guarantee from the buyer's principal — if the buyer entity defaults, the guarantor is personally liable. Non-Compete Termination Trigger. The seller's Covenant Not to Compete terminates if the buyer defaults on the Note — practical incentive for the buyer to honor payments.

§ 05 · Carrier consent and employee transferThe two timing risks that decide the closing date.

Carrier consent. In an APA, the seller's carrier appointments do not automatically transfer. Each carrier must consent and approve the buyer as a new appointed agent. Article 9.1(e) makes "necessary consents" a condition precedent. Timeline: 30–90 days depending on the carrier. Some have expedited M&A processes; others require full underwriting review. Carrier denial risk is real and should be a focus of pre-closing diligence.

Employee transfer. In an APA, employees are technically terminated by the seller and must be rehired by the buyer. The seller is responsible for all pre-closing compensation, commissions, bonuses, and unused vacation/sick leave (Article 4). The APA should address which employees the buyer intends to hire, salary/benefit continuity, and PTO accruals.

§ 06 · E&O tail coverageThe 5-year firewall.

Article 8.9 typically requires the seller to obtain 5-year extended discovery E&O coverage — protecting against claims reported after closing for acts or omissions that occurred before. Cost: typically 150–300% of the annual E&O premium, paid as a lump sum at closing. Most E&O claims surface within 3–5 years of the underlying error; the 5-year tail provides coverage through the typical claims discovery period.

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