Are Creative Colors vehicles leased 'as is'?

The Company subleases vehicles to some franchisees as part of its operations. The Company recognizes outstanding Sale Type Leases liabilities as Sales Type Lease Obligation on the balance sheet. The Sales Type Lease Obligation is the amount owed for the vehicles to the original lender based on a master lease agreement. The Company receives the payment from the franchisee and delivers the payment to the original lender. The Company charges an administrative fee for this service. As of December 31, 2024, 2023 and 2022, the Company received $5,941, $4,652 and $6,068 in administrative fees, respectively. If a franchisee has a breach of contract, the Company will regain control over the underlying asset and record the asset as a Financing Lease Obligation. See Note 8 for further information.

Creative Colors International, Inc. Exhibit F – Franchise Agreement FDD - 82

• D. Franchisee at its expense shall at all times during the term of this Agreement, maintain the interior and exterior of the mobile units utilized in the Franchised Business in good repair, attractive appearance, sound operating condition and equipped in accordance with Franchisor's standards and specifications. Franchisee, at the request of Franchisor, shall make necessary repairs and equipment modifications or additions to Franchisee's mobile units used in the Franchised Business in order to maintain the reputation of the System within a reasonable period of time after requested by Franchisor do so.
• E. It shall be the sole responsibility of Franchisee to investigate all applicable licensing, leasing and other requirements for the operation and maintenance of Franchisee's mobile units and to ensure ongoing compliance with all such requirements throughout the term of this Agreement.
• 1. INDEMNITY: Lessee agrees to indemnify Lessor from and against any and all losses, damages, liabilities, suits, claims, demands, expenses and costs (including, without limitation, reasonable attorneys' fees and expenses) which Lessor may incur by reason of Lessee's breach or violation of, or failure to observe or perform, any term, provision or covenant of this Agreement, or as a result of any loss, damage, theft or destruction of any Vehicle or related to or arising out of or in connection with the use, operation or condition of any Vehicle.
• 1. INSPECTION OF VEHICLES; ODOMETER DISCLOSURE: Lessee agrees to accomplish, at its expense, all inspections of the Vehicles required by any governmental authority during the Term. Lessor will have the right to inspect any Vehicle at any reasonable time(s) during the Term and for this purpose to enter into or upon any building or place where any Vehicle is located. Lessee agrees to comply with all odometer disclosure laws, rules and regulations and to provide such written and signed disclosure information on such forms and in such manner as directed by Lessor.
• 1. USE AND SURRENDER OF VEHICLES: Lessee agrees to allow only duly authorized, licensed and insured drivers to use and operate the Vehicles.

Lessee agrees to comply with, and cause its drivers to comply with, all laws, statutes, rules, regulations and ordinances and the provisions of all insurance policies affecting or covering the Vehicles or their use or operation.

Lessee agrees to keep the Vehicles free of all liens, charges and encumbrances.

Lessee agrees that in no event will any Vehicle be used or operated for transporting hazardous substances or persons for hire, for any illegal purpose or to pull trailers that exceed the manufacturer's trailer towing recommendations.

Source: Item 23 — RECEIPT (FDD pages 69–217)