What documents should you read to verify what the 10-K claims?

The 10-K's main financial statements and disclosures rest on supporting evidence. A company discloses that it has a $100M supply contract, leases a manufacturing plant, or guarantees a loan. But where is the actual contract? The exhibits section of the 10-K is where the company links to or attaches this evidence. Item 15 is the index to the exhibits and supplementary schedules. Many investors skip Item 15 entirely, treating it as a filing bureaucracy. But exhibits are where red flags hide. A vague reference to a "material supply contract" in the MD&A becomes much more concerning when you read the actual contract and discover it has unfavorable renewal terms or a sole-supplier clause that locks the company in.

Quick definition: An exhibit is a supporting document required or permitted to be filed with the 10-K. Exhibits include bylaws, charters, board resolutions, material contracts, underwriting agreements, and officer certifications. A schedule is a supplementary financial statement or data table, often filed separately. Item 15 lists all exhibits and schedules and indicates which are filed versus incorporated by reference (linked to a prior filing).

Key takeaways

• Not all exhibits are filed inline with the 10-K. Some are "incorporated by reference," meaning the company links to them in a prior filing (e.g., an amendment or proxy). This can make exhibits hard to find but also allows companies to avoid filing the same document repeatedly.
• Material contracts are among the most important exhibits. A company must file contracts that are material and not ordinary in the course of business (e.g., exclusive supply deals, major customer contracts, significant debt agreements, change-of-control provisions).
• Exhibit 31 (CEO and CFO certifications) and Exhibit 32 (Sarbanes-Oxley 906 certifications) are legally binding. Officers personally certify that the 10-K is accurate and sign under penalty of perjury. These are rarely read but carry serious legal weight.
• Financial statement schedules (often filed as supplementary documents) provide detail on specific line items. For example, a property and equipment schedule breaks down the composition of PP&E. These are less common now (consolidated financial statements have reduced their necessity), but when present, they reveal detail.
• Exhibits can reveal problems that narrative disclosures hide. A debt agreement with restrictive covenants, a customer contract with a termination clause triggered by a stock price drop, or a guarantee with unfavorable terms all tell stories that the MD&A might gloss over.

Common exhibit types

Certificates of incorporation and bylaws (Exhibits 3.1, 3.2, 4.1)

These foundational documents define the company's legal structure, governance, and shareholder rights. Exhibits 3.1 and 3.2 are the certificate of incorporation and bylaws. Exhibit 4.1 is a specimen stock certificate or indenture for debt securities. These are boilerplate for most companies and rarely critical, but they matter if there are unusual provisions:

• Anti-takeover provisions (staggered boards, poison pills, classified stock) affect how easily a hostile bidder can acquire the company.
• Supermajority voting requirements (requiring 66% or 80% shareholder vote for mergers) entrench management.
• Blank-check preferred stock gives the board the power to create new share classes unilaterally.

If a company has controversial governance features, they'll be embedded in these exhibits.

Board and committee charters (Exhibits 8.1, others)

Companies file charters for the board, audit committee, compensation committee, and nominating committee. These documents outline the committee's scope, independence standards, and decision-making authority. They are usually boilerplate but occasionally reveal weak governance:

• An audit committee charter that gives the committee limited authority to hire advisors or investigate issues.
• A compensation committee with inadequate clawback authority over executive bonuses in case of restatement.
• Absence of a charter altogether (though this is now rare for public companies).

Material contracts (Exhibits 10.1 to 10.99)

These are contracts that are material and not ordinary. Common examples:

• Supply agreements: Exclusive or sole-source contracts, volume commitments, pricing terms.
• Customer contracts: Major customer agreements, especially those with volume minimums or termination clauses.
• Debt indentures: Bonds or term loans with covenants, interest rates, maturity dates.
• Lease agreements: Operating leases for real estate or equipment (though these may also be summarized in footnotes under ASC 842).
• Executive employment agreements: Compensation, severance, change-of-control provisions.
• Change-of-control agreements: Arrangements triggered if the company is acquired (golden parachutes, earnout provisions).
• License agreements: IP licenses from third parties or granted by the company.
• Joint venture or partnership agreements: Governance and profit-sharing terms.

Material contracts are subject to a materiality threshold: the contract must be of such importance that a buyer would want to review it before purchasing the company. A company's standard customer agreement that appears in thousands of sales is not "material" in this sense. But an exclusive distribution agreement with a single distributor representing 40% of sales is material.

Companies sometimes redact sensitive information (pricing, customer names, proprietary terms) from contracts they file, using Regulation S-K Item 601(b)(10) to request confidential treatment. This is legitimate for trade secrets, but excessive redaction can hide unfavorable terms.

Officer certifications (Exhibits 31, 32)

Exhibit 31 contains the CEO and CFO certifications required under Sarbanes-Oxley 302. The officers state, under penalty of perjury, that:

• They have reviewed the 10-K.
• The 10-K does not contain untrue or misleading statements and omits no material facts.
• They are responsible for internal controls and have disclosed material weaknesses.
• They have informed the auditor of changes in internal controls and any fraud by management.

Exhibit 32 is the SOX 906 certification, an additional statement that the 10-K complies with securities laws. Officers who sign these certifications can face criminal penalties (up to 20 years imprisonment and $5M in fines per count) if the 10-K is later found to contain false or misleading statements. This is a powerful deterrent. If an officer resigns shortly after signing a 906 certification, it's a red flag.

Underwriting agreements, opinions, and consents

For companies that have issued equity or debt, the 10-K may include exhibits such as:

• Underwriting agreements for debt or equity offerings.
• Legal opinions from counsel confirming that the securities are validly issued.
• Consent letters from auditors and legal counsel to use their work in the filing.

These are technical and important mainly if there are disputes about offering terms or counsel opinions.

Other exhibits

• Subsidiaries list: A schedule of all subsidiaries, their jurisdiction of organization, and ownership percentage.
• Equity compensation plans: Details of stock option plans, restricted stock plans, and other equity awards.
• Audit committee financial expert certification: Confirmation that at least one audit committee member is a "financial expert" under SOX.
• Financial statements of unconsolidated subsidiaries: If the company has a significant affiliate accounted for under the equity method, its standalone statements may be filed as an exhibit.

Reading the exhibit index (Item 15)

Item 15 is a table listing all exhibits and schedules. It shows:

1. Exhibit number (e.g., 3.1, 10.1, 31.1).
2. Description (e.g., "Certificate of Incorporation," "Supply Agreement with Supplier XYZ").
3. Whether it is filed with the 10-K or incorporated by reference (linked to a prior filing).

A typical entry might read:

Exhibit	Description	Filed
3.1	Certificate of Incorporation, as amended	✓ Incorporated by reference from 8-K filed June 15, 2022
10.1	Supply Agreement with ABC Ltd., dated January 1, 2022	✓ Filed
10.2	Executive Employment Agreement with CEO, dated March 1, 2023	✓ Incorporated by reference from 8-K filed March 5, 2023
31.1	Certification of President and CEO pursuant to SOX 302	✓ Filed
32.1	Certification of President and CEO pursuant to SOX 906	✓ Filed

If an exhibit is "incorporated by reference," the company is not attaching it inline; instead, it is directing you to an earlier SEC filing. You can find these filings on EDGAR by searching the company name and the date mentioned.

How to access exhibits

On EDGAR, when you view a 10-K filing:

1. Scroll to the bottom of the full text and locate the exhibit table.
2. Click the exhibit link to open it. Most exhibits are in HTML or PDF format.
3. For exhibits "incorporated by reference," note the filing date and navigate to that prior filing on EDGAR to retrieve the document.

On a company's investor relations website, exhibits are often compiled separately. Some companies provide a direct link to all exhibits in one downloadable package.

For large contracts or complicated exhibits, reading the full text is worthwhile if it is not excessively redacted. For boilerplate (bylaws, charters), a scan is sufficient unless the company is known for unusual governance.

A real-world example: reading a material contract

Suppose a software company's Item 15 lists:

Exhibit 10.5: Exclusive License Agreement with TechCorp, dated January 15, 2023

You access this exhibit and find:

• TechCorp grants the company an exclusive license to use its proprietary algorithm in cloud-based applications.
• The license term is 5 years, renewable for two additional 5-year terms if both parties agree.
• Annual royalty: 5% of revenue from licensed products.
• Minimum annual royalty: $1M per year (the company must pay at least $1M annually regardless of revenue).
• Termination: TechCorp can terminate if the company fails to pay royalties or if the company is acquired by a competitor (with 30 days' notice).
• Non-compete: The company cannot license or use competing algorithms during the term and for 2 years after termination.

Now compare this to what the MD&A might say: "We have an exclusive technology license from a key supplier." That is vague. The contract reveals:

1. Royalty obligation ($1M minimum annually) is a fixed cost that reduces profitability even if product revenue slows.
2. Change-of-control risk: If the company is acquired by a competitor (a likely buyer), TechCorp can terminate, killing the deal or dramatically reducing its value.
3. Non-compete risk: After 5 years, the company is restricted from using competing technology for 2 years, which could be problematic if TechCorp doesn't renew.

This contract is material. The stock market cares about acquisition risk and cost structures. Many investors would want this information before deciding whether to buy, hold, or sell the stock. Without reading the exhibit, this risk is invisible.

A mermaid diagram: the hierarchy of exhibit importance

Common mistakes when reading exhibits

Mistake 1: Assuming exhibits are always filed inline.

Exhibits "incorporated by reference" are not attached to the 10-K. If you print the 10-K, you won't have the exhibit. You must navigate to EDGAR or the company's website to retrieve it. This can be inconvenient, but it is how the SEC works. Don't give up if an exhibit isn't immediately visible; it may be incorporated by reference.

Mistake 2: Skipping redacted sections.

If a company files a contract with redactions claiming confidentiality, you see the redacted version. This is legitimate for trade secrets. But extensive redactions can hide unfavorable terms. If a supply contract is 90% redacted, you cannot assess the actual terms. This may not be a red flag (some contracts are sensitive), but it is something to note. If the company's MD&A emphasizes the importance of this contract, lack of visibility is a weakness.

Mistake 3: Not cross-referencing with MD&A and footnotes.

If the MD&A mentions a material supply agreement, lease, or debt covenant, find the actual contract in the exhibits. Don't rely on the narrative summary. The MD&A might say "the company has a favorable long-term supply agreement"; the contract might reveal a 1-year term with annual renegotiation.

Mistake 4: Overlooking change-of-control provisions.

If the company is potentially an acquisition target, find exhibits related to change-of-control (material contracts with termination clauses triggered by acquisition, officer agreements with severance obligations, or debt with acceleration clauses). These reveal acquisition risk and costs.

Mistake 5: Not reading officer certifications.

Exhibits 31 and 32 are often glossed over, but they are legally binding. An officer who signs a SOX 906 certification is asserting, under penalty of perjury, that the 10-K is truthful. If the company later restates, the officer can face criminal prosecution. If an officer resigns shortly after signing these certifications, investigate why.

FAQ

Do I need to read every exhibit?

No. Prioritize:

1. Material contracts (supply agreements, major customer deals, debt covenants, change-of-control provisions): Read these fully.
2. Officer certifications (Exhibits 31, 32): Skim to ensure they are signed and dated.
3. Governance charters: Skim unless the company is known for governance issues.
4. Technical exhibits (subsidiary lists, plan documents): Check the index only unless you have a specific reason to dig deeper.

A typical investor might spend 15–30 minutes reviewing key exhibits, focusing on contracts that affect valuation or risk.

What does "incorporated by reference" mean?

It means the company is not attaching the document inline but is referring you to a document filed in a prior SEC filing. To retrieve it, you navigate to EDGAR, find the prior filing (the 10-K references the date and file type), and download the exhibit. This practice reduces filing size and avoids resubmitting unchanged documents.

Can a company refuse to file a material contract?

Theoretically, yes—if the company requests confidential treatment under Regulation S-K Item 601(b)(10). The SEC may grant this for trade secrets or competitive harm. However, the SEC has become stricter about "redaction requests" and expects companies to disclose the substance of material contracts even if specific numbers are redacted. A company cannot simply claim confidentiality and file nothing.

Are officer certifications a guarantee of accuracy?

No. Officers can sign certifications believing the statements are true, but later the 10-K may contain errors discovered by auditors or regulators. However, the penalty for knowingly signing a false certification is severe (criminal prosecution). This creates a strong incentive for officers to ensure accuracy. If an officer resigns shortly before or after signing, it warrants investigation.

What should I do if I find unfavorable terms in a material contract?

First, assess materiality. Is the unfavorable term a deal-breaker? For example, a $1M minimum annual payment might be immaterial for a $100M revenue company but material for a $20M revenue company. Second, consider whether the term was disclosed in MD&A or footnotes. If management mentioned it, they are aware of the risk. If it is hidden, that is more concerning. Third, compare to peers. Do competitors have similar contract terms? If so, the risk is industry-wide. If not, your company is at a disadvantage. Use this in your investment thesis.

Can exhibits reveal accounting red flags?

Yes. For instance, if a lease exhibit shows a lease that should have been capitalized under ASC 842 but the company treats it as an operating expense, the footnotes and exhibits will reveal the discrepancy. Similarly, exhibits for equity compensation plans can reveal dilution that isn't obvious from the EPS disclosure. Reading exhibits holistically (contracts, plans, financial statements) can reveal inconsistencies.

Related concepts

Change-of-control: A provision triggered when a company is acquired or a significant shareholder change occurs. Change-of-control provisions in contracts (e.g., customer agreements) or employment (golden parachutes) can have significant financial consequences.

Covenant: A binding agreement in a debt or contract document. Financial covenants (e.g., maintaining a minimum debt-to-equity ratio) and operational covenants (e.g., maintaining insurance, not selling assets) restrict management's actions.

Incorporated by reference: An SEC practice allowing a company to refer to a document filed in a prior SEC filing rather than resubmitting it. The referenced document is considered part of the current filing.

Confidential treatment: A request to the SEC to keep portions of a filing non-public, usually granted only for trade secrets or proprietary information. Excessive redactions can limit investor transparency.

Material contract: A contract that is important enough to affect an investor's decision. Materiality is judged by the SEC and company; there is no bright-line rule, but as a guide, a contract representing >1% of revenue or >5% of assets is often considered material.

Sole supplier: A supplier who is the only (or exclusive) source of a critical input. Sole-supplier relationships are high-risk because the supplier has pricing power and the company has no alternative if the supplier fails or raises prices.

Summary

Item 15 is the index to exhibits and supplementary schedules attached to (or referenced in) the 10-K. Material contracts, officer certifications, and governance documents are the most important exhibits to review. Many exhibits are "incorporated by reference," meaning they are linked to prior SEC filings rather than attached inline. Reading key exhibits—especially material contracts—can reveal risks, change-of-control provisions, and cost structures that the narrative disclosure glosses over. Redactions, while sometimes justified for confidentiality, can hide unfavorable terms. Item 15 is easy to overlook, but investors who dig into exhibits often find information that shifts their investment thesis.

Next

Read the SOX certifications and conclusion of the 10-K: Signatures and SOX certifications.