Sleep Country Canada Holdings Inc
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SLEEP COUNTRY CANADA HOLDINGS INC. ANNUAL INFORMATION FORM For the year ended December 31, 2020 March 2, 2021 TABLE OF CONTENTS INTRODUCTION ............................................................................................................................................................ 1 CAUTION REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION .............................................. 1 NON-IFRS MEASURES ................................................................................................................................................ 2 DEVELOPMENT OF THE BUSINESS .......................................................................................................................... 3 DESCRIPTION OF THE BUSINESS ............................................................................................................................. 6 RISK FACTORS .......................................................................................................................................................... 14 MATERIAL CONTRACTS ........................................................................................................................................... 26 DIRECTORS AND EXECUTIVE OFFICERS ............................................................................................................... 28 MARKET FOR SECURITIES ....................................................................................................................................... 32 TRANSFER AGENT AND REGISTRAR ..................................................................................................................... 32 INTERESTS OF EXPERTS ......................................................................................................................................... 32 ADDITIONAL INFORMATION ..................................................................................................................................... 32 AUDIT COMMITTEE .................................................................................................................................................... 33 APPENDIX A CHARTER OF THE AUDIT COMMITTEE ......................................................................................... A-1 - i - INTRODUCTION Unless otherwise stated, the information contained in this Annual Information Form (“AIF”) is given as of December 31, 2020 and all dollar amounts are expressed in Canadian dollars. CAUTION REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION This AIF contains "forward looking information" within the meaning of applicable Canadian securities laws. Forward-looking information may relate to the future outlook of Sleep Country Canada Holdings Inc. ("Sleep Country" or the "Company") and anticipated events or results and may include information regarding the financial position, business strategy, growth strategy, budgets, operations, financial results, taxes, dividends, plans and objectives of the Company. Particularly, information regarding future results, performance, achievements, prospects or opportunities of the Company or the Canadian market is forward-looking information. In some cases, but not necessarily in all cases, forward-looking information can be identified by the use of forward looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "is positioned", "estimates", "intends", "assumes", "anticipates" or "does not anticipate" or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", "will" or "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events. Discussions containing forward-looking information may be found, among other places, under "Description of the Business", "Dividend Policy" and "Risk Factors". These forward-looking statements include, among other things, statements relating to: the impact of the novel coronavirus (“COVID-19”) pandemic; the Company's expectations regarding its revenue, expenses and operations; the Company's future growth plans, including new store openings, relocations, renovations and closures in new and existing markets in addition to acquisitions; the Company's expectations with respect to growth resulting from its marketing and advertising efforts; the Company's expectations with respect to growth resulting from the continued implementation of the enhanced store design; the Company's expectations with respect to performance resulting from the implementation of the new ERP; the Company's expectations with respect to growth resulting from the continued implementation of its sales associate training programs; the Company's intention to declare dividends and the anticipated timing and quantum of any dividends; the Company's expectations with respect to its relationships with its suppliers; the Company's expectations with respect to its ability to leverage its scale to improve margins; the Company’s expectations of realized benefits as a result of its acquisition of the Endy brand; the Company’s expectation of trends and challenges that may occur in the market and/or industry in which it operates; and the market price of the Company’s common shares ("Common Shares"). These statements and other forward-looking information are based on opinions, assumptions and estimates made by the Company in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate and reasonable in the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. In addition, if any of the assumptions or estimates made by management prove to be incorrect, actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this AIF and the documents incorporated by reference herein. Accordingly, prospective purchasers are cautioned not to place undue reliance on such statements. Forward-looking information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by the Company as of the date such statements are made, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking - 2 - information. Information about factors or assumptions that could cause actual results to differ materially from expectations and that are applied in making forward-looking statements may be found in this AIF under "Risk Factors": COVID-19 emerging risk; enterprise risks and risk management; industry risk and economic sensitivity; effectiveness and efficiency of advertising expenditures; ability to maintain profitability and implement growth strategy; fluctuations in same store sales; liquidity risk; damage to the Company's reputation; competition; seasonality and weather; business continuity; real estate; remote work; workplace health and safety; dependence on key personnel; employee attraction, development and succession planning; labour relations; relationship with suppliers; service providers; intellectual property; dependence on distribution centres and timely delivery to customers; inventory management; dependence on enterprise resource planning system; IT systems implementations and data management; internet, privacy, confidentiality and cyber security; governance, change management, process and efficiency; insurance; comfort and price guarantees; debt covenants in Credit Facility; dependence on operating subsidiary; risks relating to Endy acquisition; fluctuations in product cost, inflation and foreign currency; legal proceedings; government regulation; third- party consumer financing arrangements; price volatility of the Common Shares; forward-looking information; payment of dividends; internal control over financial reporting; dilution; and securities analysts' research or reports could impact price of Common Shares. These factors and assumptions are not intended to represent a complete list of the factors and assumptions that could affect the Company or the forward-looking information provided herein. These factors and assumptions, however, should be considered carefully. All of the forward-looking information in this AIF is qualified by these cautionary statements. Statements containing forward-looking information contained or incorporated by reference herein are made only as of the date of this AIF. The Company expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law. For additional information with respect to certain of these and other risks or uncertainties, reference should be made to the section entitled "Risk Factors" on pages 14 to 26 of this AIF and to Sleep Country's continuous disclosure