SLEEP COUNTRY CANADA HOLDINGS INC.

ANNUAL INFORMATION FORM

For the year ended December 31, 2019

March 4, 2020

TABLE OF CONTENTS

CAUTION REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION ...... 1

NON-IFRS MEASURES ...... 2

GENERAL DEVELOPMENT OF THE BUSINESS ...... 3

DESCRIPTION OF THE BUSINESS ...... 5

RISK FACTORS ...... 14

MATERIAL CONTRACTS ...... 27

DIRECTORS AND EXECUTIVE OFFICERS ...... 28

MARKET FOR SECURITIES ...... 33

TRANSFER AGENT AND REGISTRAR ...... 33

INTERESTS OF EXPERTS ...... 33

ADDITIONAL INFORMATION ...... 34

AUDIT COMMITTEE ...... 34

APPENDIX A CHARTER OF THE AUDIT COMMITTEE ...... A1

- i -

CAUTION REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION

This Annual Information Form ("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 state 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 Company's expectations regarding its revenue, expenses and operations;  the Company's future growth plans, including new store openings, relocations, renovations and closures, entry into existing, satellite and new markets, and 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 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 with respect to benefits to be realized as a result of the acquisition of the online mattress retailing business operated under the Endy brand;

 anticipated trends and challenges in the Company's business and the market in which it operates; and

 the market price for the common shares of the Company ("Common Shares").

- 2 -

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 information, including but not limited to the following factors described in greater detail in "Risk Factors": industry risk and economic sensitivity; effectiveness and efficiency of advertising expenditures; ability to maintain profitability and implement growth strategy; fluctuations in same store sales; damage to the Company's reputation; competition; seasonality and weather; real estate; dependence on key personnel; labour relations; relationship with suppliers; intellectual property; dependence on distribution centres and timely delivery to customers; dependence on management information systems; internet, privacy and confidentiality; insurance; comfort and price guarantees; debt covenants in the Credit Facility (as defined herein); dependence on operating subsidiary; 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 the price of the 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 27 of this AIF and to Sleep Country's continuous disclosure materials filed from time to time with Canadian Securities Regulatory Authorities, which are available on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com. Additional risks and uncertainties not presently known to the Company or that Sleep Country currently believes to be less significant may also adversely affect the Company.

NON-IFRS MEASURES

This AIF makes reference to certain non-International Financial Reporting Standards ("IFRS") measures such as “Same Store Sales” (‘SSS’), “Operating EBITDA” and “Adjusted Net Income”. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS. They are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS measures by providing

- 3 - further understanding of the Company's results of operations from management's perspective. Accordingly, they should not be considered in isolation or as a substitute for analysis of the Company's financial information reported under IFRS. These non-IFRS measures are used to provide investors with supplemental measures of the Company's operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. The Company also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers and to compare the Company's performance against others in the retail industry. The Company's management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and to determine components of management compensation.

Prospective investors should review this information in conjunction with the Company's consolidated financial statements, including the notes thereto, as well as the related management's discussion and analysis of financial condition and results of operations.

For further details concerning how the Company calculates these non-IFRS measures, and for a reconciliation to the most comparable IFRS measure, please refer to the management's discussion and analysis for the fiscal year ended December 31, 2019 which is available on SEDAR at www.sedar.com.

GENERAL DEVELOPMENT OF THE BUSINESS

Background Sleep Country launched its concept in the Vancouver market with four stores in 1994 and has since expanded across Canada with 276 corporate-owned stores and 17 distribution centres in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, Nova Scotia, New Brunswick and P.E.I. as at December 31, 2019. Sleep Country is the only specialty mattress retailer in Canada with a national and regionally diverse footprint.

Sleep Country entered the Québec market through the acquisition of Dormez-vous? Sleep Centres in January 2006 by acquiring five stores and one distribution centre. The Company began operating in the United States under the banner "Sleep America" when it acquired Sleep America, LLC, a mattress retailer located in the State of Arizona, in March 2006.

Sleep Country was listed on the Toronto Stock Exchange (the "TSX") between 2003 and 2008 as an income fund. The income fund was acquired in 2008 by a group of investors led by Birch Hill Equity Partners Management Inc. ("Birch Hill"), together with members of management including co-founding partners Stephen Gunn and Christine Magee, the Company's Chief Executive Officer, David Friesema, and Chief Business Development Officer and President of Dormez-vous?, Stewart Schaefer.

Beginning in 2012, under the supervision of David Friesema, Stewart Schaefer and the rest of the current management team, the Company undertook a comprehensive review of its operations. As a result of this review, since 2012, the Company has implemented and invested in a number of strategic programs aimed at driving future growth, including: revamped the advertising strategy, enhanced the sales and service training, redesigned and expanded the accessories line, broadened the real estate footprint across Canada, implemented an enhanced store design, upgraded logistics systems and software, and divested Sleep America and exited the U.S. market. The Company operated in the U.S. until January 2015 when it sold all of its interest in the Sleep America assets to a national U.S. mattress retailer in order to focus management's efforts on growing the Company's Canadian market share.

- 4 -

On July 16, 2015, the Company completed its initial public offering (the "IPO") of 17,650,000 Common Shares for aggregate gross proceeds of $300,050,000 and the Common Shares began trading on the TSX under the ticker symbol "ZZZ". Immediately following completion of the IPO, the Company acquired (the "Acquisition") all of the issued and outstanding shares of Sleep Country Canada Inc. ("SCCI"), Sleep Country US Holdco Canada Inc. ("SC US Holdco") and SC Management Holding Inc. ("SC Management", and together with SCCI and SC US Holdco, the "Acquired Entities") not already owned by it pursuant to the terms and conditions of the share purchase agreement dated July 10, 2015 among the Company, SCCI, SC US Holdco, SC Management and the shareholders of SCCI, SC US Holdco and SC Management (the "Purchase Agreement"). The Acquired Entities previously carried on, directly or indirectly, the business of Sleep Country.

Pursuant to the Purchase Agreement, the purchase price payable by the Company to the existing shareholders of the Acquired Entities for the purchased shares was $461,673,036 which was satisfied by (a) an aggregate cash payment of $193,512,214, (b) the issuance to the existing shareholders of an aggregate of 13,126,666 Common Shares, and (c) the issuance to certain selling shareholders of an aggregate of $45,007,500 principal amount of certain promissory notes, all of which were converted on August 31, 2015 into an aggregate of 2,647,500 Common Shares. A business acquisition report was filed in respect of the Acquisition in compliance with National Instrument 51-102 – Continuous Disclosure Obligations and is available online on SEDAR at www.sedar.com.

Since the IPO, the Company has continued to successfully execute its stated growth strategy, opening 60 new stores, renovating 114 existing stores in the enhanced store design and relocating 7 stores.

On December 6, 2018, the Company acquired the business of Overwater Limited, operating under the brand name Endy, an online mattress retailer operating in the Canadian market. The acquisition was made by Endy Canada Inc. (“Endy”), a newly formed subsidiary of the Company by purchasing the majority of the assets of Overwater Limited, net of designated liabilities assumed. The objective of the acquisition of Endy is to provide the most convenient customer experience to a wider base of Canadian consumers shopping for a better night’s sleep, recognizing that consumer shopping habits are evolving. The Company remains focused on serving its customers in any way they want to shop and providing them with the choice to navigate easily between traditional and online channels. The acquisition of Endy will, along with Sleep Country’s existing ecommerce and Bloom mattress-in-a-box offerings, complement Sleep Country’s national store footprint and diverse selection of sleep products.

Three-Year History of the Business In 2017, revenues increased by 12.3% compared to 2016, from $523.8 million to $588 million, primarily driven by an 8.8% increase in SSS. The increase in total revenue was comprised of an increase in mattress sales and accessory sales. Mattress sales revenue increased by 12.9%, from $420.4 million to $474.6 million. Accessory revenue increased by 9.7%, from $103.4 million to $113.4 million. Operating EBITDA was $99.8 million for 2017 compared to $85 million for 2016, representing an increase of $14.8 million (or 17.4%). Adjusted net income for 2017 was $62 million (or $1.65 per share) compared to $51.1 million (or $1.36 per share) for 2016, which is an increase of $10.9 million (or 21.3%). The increase was primarily due to higher Operating EBITDA, partially offset by an increase in finance related expenses, an increase in depreciation and income tax expense. See "Non-IFRS Measures".

In 2018, revenues increased by 6.1% compared to 2017, from $586.9 million to $623.0 million driven by the addition of 17 new stores since December 31, 2017 and a 1.4% increase in SSS. The increase in total revenue was comprised of an increase in mattress sales and accessory sales. Mattress sales revenue increased by 4.2%, from $474.1 million to $497.0 million. Accessory revenue increased by 11.7%, from $112.8 million to $126.0 million. Operating EBITDA was $105.8 million for 2018 compared to $100.0

- 5 - million for 2017, representing an increase of $5.8 million (or 5.8%). Adjusted net income for 2018 was $63.9 million (or $1.72 per share) compared to $62.2 million (or $1.65 per share) for 2017, which is an increase of $1.7 million (or 2.7%). The increase was primarily due to higher Operating EBITDA, partially offset by an increase in finance related expenses, depreciation and income tax expense. See "Non-IFRS Measures".

In 2019, revenues increased by 14.3% compared to 2018, from $623.0 million to $712.4 million due to the addition of 12 new stores since December 31, 2018, wrap stores, the inclusion of revenue from Endy since its acquisition in December 2018 and growth in same store sales (“SSS”) (excluding Endy) of 0.3%. The increase in total revenue was comprised of an increase in mattresses sales and accessories sales. Mattresses revenue increased by 13.7% from $496.6 million in 2018 to $564.7 million in 2019. Accessories revenue increased by 16.9% from $126.4 million in 2018 to $147.7 million in 2019. Operating EBITDA was $151.9 million for 2019 compared to $101.4 million for 2018, representing an increase of $50.5 million (or 49.8%). Adjusted net income for 2019 was $59.3 million (or $1.60 per share) compared to $63.9 million (or $1.72 per share) for 2018, which is a decrease of $4.6 million (or 7.2%). The decrease in adjusted net income was mainly a result of lower net income and lower stock compensation expense incurred in 2019 compared to 2018 is due to the forfeiture of options and performance share units upon departure of employment of eligible associates. See “Non-IFRS Measures”.

DESCRIPTION OF THE BUSINESS

Except as otherwise stated, the information contained in this AIF is given as of December 31, 2019 and all dollar amounts are expressed in Canadian dollars.

Business Overview Sleep Country is Canada's leading mattress retailer and the only specialty mattress retailer with a national footprint. Sleep Country operates under three mattress retail banners (the “Banners”): “Sleep Country Canada”, the largest mattress retailer in Canada excluding Québec; “Dormez-vous?” the largest retailer of mattresses in Québec and “Endy”, a leading Canadian online mattress-in-a-box retailer. Sleep Country continues to expand its presence coast to coast. Since the beginning of 2007, the Company has opened 127 new stores and, as at December 31, 2019, it had 276 stores and 17 distribution centres across Canada. Sleep Country’s stores average approximately 5,000 square feet and offer a large selection of mattresses, box spring bases, metal frames, lifestyle bases and a wide assortment of complementary sleep related products (“Accessories”), which include pillows, mattress pads, sheets, duvets, headboards, footboards and platforms. Sleep Country’s stores are all corporate-owned, enabling it to develop and maintain a strong culture of customer service, resulting in a consistent and superior in-store and home delivery customer experience. In the second quarter of 2017, the Company also launched its new eCommerce platform and the Bloom™ brand to meet the needs of the consumers looking for the convenience of online shopping. On December 6, 2018, Sleep Country acquired Endy Canada Inc. The acquisition secures Sleep Country’s positioning in the accelerating online mattress segment and provides Sleep Country with a stronger ability to compete with U.S. and international entrants to the Canadian market.

In 2019, the Company expanded its online offering with the launch of its new ecommerce platform. With the launch of the new website, we continue to deepen our omnichannel experience with our customers by offering them a wider array of sleep products on our website.

- 6 -

The Company has an attractive financial model that historically has enabled it to fund its growth from internal cash flow due to its low capital expenditure requirements. Sleep Country also has been able to generate cash from working capital as the business grows by adding new stores. It has compelling new store economics where new stores typically contribute positive cash flow to the business within a short period of time after opening. Over the past 5 years, the Company has focused on growing revenue from the Accessory category of products, which have required some investment in working capital. The Company has a 24-year track record of profitable growth and has established its presence and brand as the leading mattress retailer in Canada.

Corporate Structure The Company was incorporated under the Canada Business Corporations Act (the "CBCA") on May 27, 2015. The articles of the Company have since been amended to delete the preference shares of the Company and to create and authorize the issuance of Class A common shares (the "Class A Common Shares") and the Common Shares. SCCI amalgamated under the CBCA on November 1, 2008.

As of the date of this AIF, SCCI and Endy Canada Inc are the only two subsidiaries of the Company. The Company beneficially owns, controls or directs, directly or indirectly, 100% of the votes attaching to all voting securities of SCCI and Endy Canada Inc.

As at December 31, 2019, the Company manages its business on the basis of two operating segments, which is consistent with the internal reporting provided to the chief operating decision-maker, the Chief Executive Officer. The Company has only one reportable segment as the operating segments meet the aggregation criteria of IFRS 8. The Company operates in Canada, which is its country of domicile.

The registered and head office of the Company is located at 7920 Airport Road, Brampton, ON, L6T 4N8.

Competitive Position Compelling Industry Fundamentals Management believes that the North American wholesale mattress industry is characterized by steady, stable long-term growth. Management believes the industry is well-positioned to continue its growth trajectory given favourable fundamentals and long-term trends driven by the following key factors:

 Necessity item: Mattresses are a necessity rather than a fashion purchase. During an economic downturn, purchases are typically deferred and not lost.

 Replacement cycle: Customers typically replace their mattresses every 10 to 12 years, generating a steady flow of recurring demand.

 Demographic trends: Unit demand is further driven by steady long-term demographic trends, including general population increases, the formation of new households, the growth in recreational properties and the trend towards a larger number of rooms in homes.

 Consumer preferences for high-quality sleep: In recent years, the mattress industry has experienced an increase in the demand for larger size mattresses and for premium quality products, due in some measure to the aging North American population, its relative affluence and its growing health awareness. The Company believes that this increase in demand for larger and better quality products has resulted in a shift to higher-priced mattress sets.

- 7 -

 Shift toward specialty retailers: There has been a shift in consumer preference toward specialty retailers given the unique consumer needs, the big-ticket purchase and lack of consumer familiarity with developments in product offerings.

 Online research: Consumers often conduct online research to gain product knowledge and perform general price comparisons. However, compared to other retail categories, historically, the mattress industry was not as vulnerable to ''showrooming'' or online shopping as it is difficult to compare models and brands between retailers and the purchase decision is highly tactile. The vast majority of consumers test and purchase the product in-store, however recent trends have indicated that an increasing percentage of consumers are choosing to purchase certain types of mattress online. In response to these trends, in the second quarter of 2017, the Company launched its new eCommerce platform and the Bloom™ brand to meet the needs of the consumers looking for the convenience of online shopping. On December 6, 2018, Sleep Country acquired Endy Canada Inc. The acquisition secures Sleep Country’s positioning in the accelerating online mattress segment and provides Sleep Country with a stronger ability to compete with U.S. and international entrants to the Canadian market. In the fourth quarter of 2019, the Company launched its new cloud based Oracle eCommerce platform, providing customers a best in class online experience. The new website offers customers a larger selection of mattresses, lifestyle bases and Accessories. These recent enhancements to the Company’s online experience allow customers to interact with the Company’s three banners when they want, how they want and where they want.

 Inflation: Price increases from manufacturers due in large part to inflation are typically passed through to customers.

Best-in-Class Retailer Driven By Superior Strategy and Execution Sleep Country is a "best-in-class" retailer creating a competitive advantage for the Company that is anchored in a highly focused and exceptionally executed strategy.

Strong Brand Recognition Sleep Country invests significantly in advertising and brand development to create "top-of-mind" unaided brand awareness which drives the largest share of customer visits across Canada. Through a combination of radio, television, print, targeted online advertising and digital presence for 52 weeks of every year, Sleep Country conveys a consistent message that it is a trustworthy, enjoyable place to purchase high quality mattresses and accessories at competitive prices. Messages are repeated frequently, with consistent elements and a focus on a Banner's name, logo, use of a catchy jingle, and trade-marks of "Why Buy a Mattress Anywhere Else?" and “All for Sleep” for Sleep Country Canada and "Tout le monde devrait bien dormir" and “Tous pour le sommeil” for Dormez-vous?. The Company's cumulative advertising investment over the past 24 years and differentiated brand development strategy represent a substantial competitive advantage in the retail mattress industry.

Leader in Digital Marketing and Customer Experience Endy entered the e-commerce scene in 2015, and since then has become one of Canada’s best- selling online mattress brands. Since launch, Endy has established a reputation as a leader in digital and integrated marketing, creating meaningful touchpoints with customers on, among others, social media, out- of-home, direct mail, e-mail, search and display. Communicating Endy’s mission -- to help Canadians get a better night’s sleep -- is key to the brand’s marketing efforts across all channels. With a focus on simplicity, honesty, and quality design, Endy has established a market presence in a competitive market

- 8 - with an emphasis on customer service. The brand is best-known for its premium, affordable, and Canadian- made Endy Mattress; high standards of customer experience; and 100 Night Trial. The brand recently launched showrooms across the country in partnership with Canadian retailer Urban Barn, giving more Canadians the opportunity to experience the Endy Mattress in person.

In the fourth quarter of 2019, the Company launched its new cloud based Oracle eCommerce platform, providing customers a best in class online experience. The new website provides customers an enhanced omnichannel experience by offering them a larger selection of mattresses, lifestyle bases and Accessories. These recent enhancements to the Company’s online experience allows customers to interact with the Company’s three banners when they want, how they want and where they want.

Unrivalled In-Store Customer Experience The Company distinguishes itself through a superior in-store experience that results in high conversion of sales, repeat business and superior sales per associate metrics. Due to the fact that a mattress is an infrequent purchase, a big-ticket item and a difficult product to compare, customers require a knowledgeable and effective sales associate. Customers also have highly personalized tastes, preferences, needs and budgets, which combined with the complex and constantly evolving product landscape, increases the need for a knowledgeable and effective sales associate. In response, Sleep Country invests heavily in initial and ongoing training to ensure it delivers a highly informative, friendly and helpful (not pushy or intrusive) customer experience. This experience is further enhanced by the cumulative knowledge and abilities of a long tenured full-time sales team with low turnover. In addition, the Company offers a superior and extensive assortment of mattresses and related products, including a wide range of comfort choices, styles, sizes and price points. The Company strives to take the worry out of the customer's purchase decision by offering 100-day price and comfort guarantees.

Superior Home Delivery Experience and Ongoing Customer Relationships Management believes that the home delivery experience is just as critical as the in-store experience and has developed a customer centric approach to its delivery model which it believes plays a critical role in customer satisfaction, repeat sales and word-of-mouth advertising. Sleep Country offers delivery seven days a week within a specified three-hour time frame. The Company selects individuals with positive attitudes and teaches them critical customer service and delivery skills. Delivery personnel are uniformed, wear shoe covers to protect the customer's home and are trained to be courteous. New mattresses are setup, packaging materials are removed and the replaced mattress set is either donated to charity or recycled. Management believes that the entire delivery process makes for a very positive experience and often leads to favourable word-of-mouth advertising. In addition, the entire customer experience is complemented by both a well-trained, in-house customer service department and a complete enterprise-wide information technology system to support delivery logistics and provide a seamless customer experience. Sleep Country continually receives positive feedback from customers.

Highly Trained and Dedicated Workforce with a Strong Culture of Customer Service Sleep Country has a comprehensive approach to human resource management that is built on a foundation of family values, commitment to training and development and competitive compensation and benefits. This has resulted in a workforce dedicated to delivering superior customer service, underpinned by excellent relations between management and employees and reinforced by high retention rates.

- 9 -

Convenient and Highly Visible Locations Sleep Country's stores are located in convenient locations to make it easy for customers to visit a store when they are shopping for a mattress. Stores are strategically located in each regional market close to residential areas, in high-traffic, highly visible locations with prominent signage and convenient access. While customers may research mattresses online, management believes that the vast majority of mattress customers visit a mattress retailer to test the product and make a purchase.

Experienced and Committed Management Team Sleep Country is led by a highly experienced management team with a proven track record. On average, the Company's executives have over 15 years of experience with Sleep Country and over 20 years of relevant industry experience. Sleep Country's Chief Executive Officer, David Friesema, joined the Company in 1995 and, along with Stewart Schaefer, President of Dormez-vous? and Chief Business Development Officer and other members of senior management, has been instrumental in enhancing the sales training programs, refocusing the advertising strategy, expanding the accessories category of the business and driving new store expansion. In addition, the Company's co-founder, Christine Magee, serves as Chair of the Company.

Competition The retail mattress industry is highly competitive and includes national and regional full-line furniture retailers, departmental retailers, small regional specialty mattress retailers and online retailers. The eight leading retailers in the industry include Sleep Country / Dormez-vous?, Leon's Furniture Limited ("Leon's") / The Brick Ltd. ("The Brick"), The Hudson's Bay Company ("Hudson's Bay"), BMTC Group Inc. ("BMTC"), IKEA, Amazon.com, Inc ("Amazon"), Casper Sleep Inc. ("Casper") and Costco Wholesale Canada Ltd. ("Costco"). Of these eight retailers, Sleep Country is the leading specialty mattress and sleep accessory retailer in Canada. The remaining industry sales are highly fragmented amongst a number of smaller specialty mattress stores, other furniture stores, discounters and warehouse clubs and small independent retailers. See "Risk Factors — Competition".

Facilities As at December 31, 2019, Sleep Country operated 276 stores and 17 distribution centres in Canada. Stores are generally located in convenient, highly visible locations and average approximately 5,000 square feet in size. Sleep Country's distribution centres range in size from approximately 15,000 square feet to approximately 110,000 square feet.

All retail store and distribution centre premises are leased under operating leases that typically have a term of five to 15 years and contain options for renewal or permit continuation of the lease on a month- to-month basis. Management believes that it has a good relationship with each of its landlords, that business carried on at these leased locations is relocatable and that no individual lease or location is material.

Suppliers The Company's overall size, regional market leadership and approach to supplier relations result in strong relationships with its leading suppliers, Tempur-Sealy®, Serta®, Simmons®, Kingsdown® and Dormeo®, that yield many advantages. These advantages include better product cost than many of its smaller competitors, and the ability of the Company to obtain unique products and product features and high service levels from suppliers.

- 10 -

Trademarks The Company's trademarks, such as Sleep Country Canada®, Dormez-vous?®, Endy®, Why buy a mattress anywhere else?®, All for SleepTM , Tout le monde devrait bien dormir®, and Tous pour le sommeilTM are protected under applicable intellectual property laws and are the property of the Company. The Company believes that the Sleep Country Canada brand and its trademarks are important to its competitive position and marketing its merchandise. The Company takes a proactive approach to protecting its brand and trademarks.

Corporate Social Responsibility Reducing Environmental Impacts - Bed Donation & Recycling Program Sleep Country is proud to be the only national mattress retailer offering a comprehensive Mattress Recycling Program. For every new Sleep Country mattress we deliver to you, our team will pick up your old mattress for a $15 (plus applicable tax) Green Fee. When collected, mattresses are examined and evaluated, and are either donated or recycled based on their condition. Donation beneficiaries include The Furniture Bank in Toronto, The Heart of the Northeast in Calgary, The Bissell Centre in Edmonton and the Western Regional Advocacy Group Society in British Columbia. In 2019, over 138,000 mattress and foundation units were diverted from landfills through donation or recycling.

Sleep Country Cares From the very beginning, it has always been a privilege to give back to the communities where we live and work. Through the Sleep Country Cares Program, the Company is committed to supporting local charities that focus on helping children and families in need.

Sleeping Children Around the World (SCAW) Sleep Country Canada is a proud supporter of Sleeping Children Around the World (SCAW), a Canadian charity focused on helping children in developing countries get a restful night’s sleep. Each $35 donation provides a child in a developing country with a bedkit. 100% of all the funds received from donors go to the purchase of items included in the bedkit - mosquito net, mattress, pillows, blanket, bed sheets, plastic ground cover, school uniforms, school supplies and more. SCAW coordinates a number of bedkit distributions annually in developing countries with overseas volunteers. The bedkits promote gender equality in these countries, as 50% are distributed to boys and 50% are distributed to girls. Sleep Country participates in Sleep Day annually: associates donate and wear pyjamas all day. Proceeds collected go directly to SCAW.

Counting Sheep for Mental Awareness We know the power of sleep: it benefits both our bodies and our mental well-being. For the month of May, when you purchase a plush Serta Sheep for $10 (plus tax), the net proceeds are donated to the Canadian Mental Health Association (CMHA). We will also donate $5 from every Snuggable Weighted Blanket sold in May. Our goal is to help CMHA provide important support services and programs to over 1.3 million Canadians. Everyone deserves to wake up feeling well.

- 11 -

Pyjamas & Storybooks for Better Bedtimes At Sleep Country, we know a good night’s sleep starts with a good bedtime. Yet, many children in Canada live in poverty, often without the comfort of pyjamas and bedtime stories to fuel their dreams. During the month of July, we accept donations of new and gently used children’s pyjamas and storybooks at all Sleep Country locations across Canada to help provide children in need with a better night’s sleep. All pyjamas and storybooks collected will stay in their local communities, and will be donated to charities and organizations like the Salvation Army to help those in need.

Give a Kid a Coat Since 1998, we’ve provided thousands of Canadian children with proper winter clothing to keep them warm and cozy. Every October and November, we collect new and gently used clean winter coats, hats and mittens at all Sleep Country locations across Canada. All winter items collected will stay in their local communities, and will be donated to charities and organizations like the Salvation Army to help those in need.

Employees As at December 31, 2019, the Company and its subsidiaries had 1,483 employees. Of this group, 1,450 were full-time employees and the remainder were part-time employees. As at December 31, 2019, 87 employees were unionized, comprising approximately 6.0% of the total workforce. All of the unionized employees are employed at Sleep Country's Greater Vancouver, Victoria and Brampton distribution centres. The current agreement with Retail Wholesale Union Local 580 covering the Greater Vancouver and Victoria sites was renewed on January 1, 2018 for a four-year term expiring on December 31, 2021. The current agreement with the Workers United Canada Council, on its own behalf and on behalf of its Local 2757, in respect of the Brampton site was ratified January 28, 2019 retroactive to January 14, 2019 for a three-year term expiring on January 13, 2022. Management believes its relations with employees are excellent and experiences turnover rates well below industry norms. The Company has never experienced a work stoppage and has been successful in renegotiating its collective agreements.

In 2019, Sleep Country / Dormez-vous? was certified as a Great Place to Work and won recognition for Best Workplaces for Mental Wellness, Best Workplaces for Giving Back and Best Workplaces in Retail and Hospitality.

Legal Proceedings The Company is not party to any legal proceedings other than ordinary course, routine litigation which is not material to its business, results of operations or financial condition.

Dividend Policy Subject to financial results, capital requirements, available cash flow and any other factors that the board of directors of the Company (the "Board of Directors") may consider relevant, it is the intention of the Board of Directors to continue to declare a quarterly dividend on an ongoing basis. All dividends to be paid by the Company, unless otherwise indicated, are designated as eligible dividends in accordance with subsection 89(14) of the Income Tax Act (Canada) and any applicable corresponding provincial or territorial provisions. See "Risk Factors — Payment of dividends".

- 12 -

Since the completion of the IPO in July 2015, the Company declared and paid the following dividends on its Common Shares:

Dividend Declared Date of Declaration Record Date Payment Date (Per Share) November 3, 2015 November 16, 2015 November 26, 2015 $0.13 January 29, 2016 February 16, 2016 February 26, 2016 $0.13 May 10, 2016 May 20, 2016 May 30, 2016 $0.13 July 28, 2016 August 16, 2016 August 26, 2016 $0.15 November 1, 2016 November 18, 2016 November 28, 2016 $0.15 January 26, 2017 February 17, 2017 February 27.2017 $0.15 May 9, 2017 May 19, 2017 May 29, 2017 $0.165 August 2, 2017 August 18, 2017 August 28, 2017 $0.165 November 1, 2017 November 17, 2017 November 27, 2017 $0.165 January 26, 2018 February 16, 2018 February 26, 2018 $0.165 May 7, 2018 May 22, 2018 May 31, 2018 $0.185 August 2, 2018 August 20, 2018 August 30, 2018 $0.185 November 1, 2018 November 19, 2018 November 29, 2018 $0.185 February 5, 2019 February 15, 2019 February 26, 2019 $0.185 May 6, 2019 May 21, 2019 May 31, 2019 $0.195 August 8, 2019 August 20, 2019 August 29, 2019 $0.195 October 31, 2019 November 19, 2019 November 29, 2019 $0.195

Subsequent to the fiscal 2019 year end, on February 4, 2020, the Board of Directors declared a dividend on the Common Shares in the amount of $0.195 per Common Share, payable on February 25, 2020 to shareholders of record at the close of business on February 14, 2020.

Historical Dividends Paid $0.800

$0.700 $0.770 $0.720 $0.600 $0.645 $0.500 $0.560

$0.400

$0.300

Dividends Dividends Paid $0.200

$0.100

$0.000 2016 2017 2018 2019 Year

- 13 -

The Credit Facility restricts the Company's ability to declare dividends in certain circumstances. The amount and timing of the payment of any dividends are not guaranteed and are subject to the discretion of the Board of Directors. See "Material Contracts" and "Risk Factors".

Normal Course Issuer Bid In the first quarter of 2019, the Company received approval from the Toronto Stock Exchange (the "TSX") to commence, effective February 28, 2019, a Normal Course Issuer Bid ("NCIB") and purchase through the facilities of the TSX up to 1,200,000 of the Company’s common shares, representing approximately 4.0% of the public float as of February 26, 2019. In accordance with the rules and by-laws of the TSX, the Company has been permitted to purchase up to a daily maximum of 35,204 Shares (representing 25% of the average daily trading volume of the Shares on the TSX for the six months prior to commencement of the NCIB), except where such purchases are made in accordance with the "block purchase" exception under the applicable TSX rules and policies. Sleep Country’s NCIB expired on February 27, 2020 and was renewed on March 4, 2020.

As of December 31, 2019, the Company had purchased 510,829 Common Shares, for cancellation, at an average price of $19.59 per share, for a total consideration of $10.0 million.

Description of Share Capital The authorized capital of the Company consists of an unlimited number of Common Shares and an unlimited number of Class A Common Shares. The summary below of the rights, privileges, restrictions and conditions attaching to the Common Shares and to the Class A Common Shares, respectively, is subject to, and qualified in its entirety by reference to, the Company's articles which are available on SEDAR at www.sedar.com.

Common Shares Holders of Common Shares are entitled to receive notice of any meetings of shareholders, to attend and to cast one vote per Common Share at all such meetings. Holders of Common Shares do not have cumulative voting rights with respect to the election of directors and, accordingly, holders of a majority of the Common Shares entitled to vote in any election of directors may elect all directors standing for election. Holders of Common Shares are entitled to receive on a pro rata basis such dividends, if any, as and when declared by the Board of Directors at its discretion from funds legally available therefor and upon the liquidation, dissolution or winding-up of the Company are entitled to receive on a pro rata basis the net assets of the Company after payment of debts and other liabilities, in each case subject to the rights, privileges, restrictions and conditions attaching to any other series or class of shares ranking senior in priority to or on a pro rata basis with the Common Shares with respect to dividends or liquidation. The Common Shares do not carry any pre-emptive, subscription, redemption or conversion rights, nor do they contain any sinking or purchase fund provisions.

Class A Common Shares Holders of Class A Common Shares are entitled to the same rights and privileges as holders of the Common Shares described above under "— Common Shares" and rank equally with the holders of Common Shares upon the liquidation, dissolution or winding-up of the Company. The Class A Common Shares do not carry any pre-emptive or subscription rights, nor do they contain any sinking or purchase fund provisions.

- 14 -

Certain Class A Common Shares were issued as part of the pre-closing transactions undertaken by the Company prior to the completion of the IPO and all such Class A Common Shares were redeemed immediately following completion of the IPO on July 16, 2015. Accordingly, there are currently no Class A Common Shares issued and outstanding, nor does the Company intend to issue any Class A Common Shares in the future.

RISK FACTORS

In addition to the risks described elsewhere in this Annual Information Form, this section describes the principal risks that could have a material and adverse effect on Sleep Country’s financial condition, results of operations or business, cash flows or the trading price of its common shares, as well as cause actual results to differ materially from Sleep Country’s expectations expressed in or implied by forward- looking statements. The risks listed below are not the only risks that could affect Sleep Country. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our financial condition, results of operations, cash flows, or business.

Enterprise Risks and Risk Management To ensure its continued growth and success, the Company is committed to maintaining a framework that ensures risk management is integral to its activities and has developed an Enterprise Risk Management (“ERM”) program to identify and manage risks.

The ERM program assists all areas of the business in managing risks within appropriate levels of tolerance by bringing a systematic approach and methodology for identifying risks, assessing and measuring the identified risks and then implementing a response and action plan. Risks cannot be eliminated through the ERM program, but rather, are identified, assessed and managed in line with the Company’s risk tolerances.

Risk identification, measurement and assessments are integral elements of the Company’s ERM framework approach. An annual ERM assessment is undertaken to assist in the update and identification of all risks, internal or external, applicable to the Company and its operations. This assessment is carried out in parallel with strategic planning with management and the Board to align stakeholder views. This assessment is completed for each business unit and aggregated where appropriate. Risks are assessed and evaluated first based on their inherent risk to the Company, meaning the level of risk without considering any actions or controls that have been put into place. The risks are then assessed for the residual risk, being the risk that remains after mitigating actions have been implemented. These are each measured on a scale of one to five for both the impact of the risk and the likelihood of the risk. Using these scores, the risks are then rated as extreme, high, medium or low. Once the risks have been measured and rated, the Company develops a response to optimize risk management which can involve avoiding the risk, transferring it or mitigating it.

On a quarterly basis, management provides an update to the Board on the status of key risks based on significant changes from the prior update, anticipated impacts in future periods and significant changes in key risk indicators. Any of the key risks has the potential to negatively affect the Company and its financial performance. The Company has risk management strategies in place for key risks. However, there can be no assurance that the risks will be mitigated or will not materialize or that events or circumstances will not occur that could adversely affect the reputation, operations or financial condition or performance of the Company.

- 15 -

Industry risk and economic sensitivity The Company's revenues depend, in part, on discretionary spending by its customers. Pressure on discretionary income brought on by economic downturns and slow recoveries, including housing market declines, changing energy prices, fiscal uncertainty and weak labour markets, may cause consumers to reduce the amount they spend on discretionary items. If recovery from any economic downturn is slow or prolonged, the Company's growth, prospects, results of operations, cash flows and financial condition could be adversely impacted. In addition, a significant percentage of the Company's stores are located in the Provinces of Ontario and Québec. Any economic downturns in these provinces would have a disproportionately greater negative impact on the Company than other retailers with a lower concentration of stores in the Provinces of Ontario and Québec.

General economic conditions and discretionary spending are beyond the Company's control and are affected by, among other things: consumer confidence in the economy; federal, provincial and local political climates; unemployment trends; consumer debt levels; consumer credit availability; the housing market; gasoline and fuel prices; interest rates and inflation; price deflation, which may result from the introduction of low-cost imports; slower rates of growth in real disposable personal income; natural disasters; national security concerns; tax rates and tax policy; currency fluctuations and other matters that influence consumer confidence and spending. Increasing volatility in financial markets may cause some of the above factors to change with an even greater degree of frequency and magnitude.

Effectiveness and efficiency of advertising expenditures The Company's advertising expenditures, which are the largest component of its marketing expenses, are expected to continue to increase for the foreseeable future. A significant portion of the Company's advertising expenditures are made in the radio, television, print and online formats. The Company's future growth and profitability will depend, in part, on the effectiveness and efficiency of advertising expenditures, including the ability to: (i) create greater brand awareness of each of the Banners; (ii) determine the appropriate creative message and media mix for future advertising expenditures; and (iii) effectively manage advertising costs to maintain acceptable operating margins. The Company cannot assure that the advertising message that it selects will result in increased customer traffic, sales and levels of brand name awareness or market share. Should the Company fail to realize the anticipated benefits of its advertising program, or should the Company fail to effectively manage advertising costs, this could have a material adverse effect on its growth strategy and profitability.

Ability to maintain profitability and implement growth strategy There can be no assurance that the Company's businesses and growth strategy will enable it to sustain profitability in future periods. The Company's future operating results will depend on a number of factors, including: (i) the Company's ability to continue to successfully execute its growth strategy; (ii) the efficiency and effectiveness of each of the Banner's advertising expenditures in building product and brand awareness, driving traffic to stores and increasing sales; (iii) the ability to realize increased sales and greater levels of profitability; (iv) the ability of the Company to effectively grow and promote the sleep related products and accessories category of its business; (v) the ability to hire, train, manage and retain qualified management and sales associates; (vi) the ability to continuously improve its service to achieve new and enhanced customer satisfaction; (vii) the ability to maintain cost-effective delivery of its products, (viii) the ability to successfully identify and respond to emerging trends in the mattress industry; (ix) the level of competition in the mattress industry; and (x) general economic conditions and consumer confidence.

While the Company believes that the methodology it employs for identifying new store locations in existing, satellite and new markets has been successful in the past, there can be no assurance that it will continue to be successful in the future. Although cannibalization of sales from existing stores has

- 16 - historically been minimal, as the Company executes on its planned growth strategy, increasing saturation of existing markets may occur which may increase cannibalization of sales at existing stores or make in-fill stores less profitable, which can have a material adverse effect on the Company's business, financial condition, liquidity and results of operations. New stores typically experience an adjustment period before sales levels and operating margins normalize, and even sales at successful newly-opened stores generally do not make a significant contribution to profitability in their initial months of operation.

The success of any expansion strategy will be dependent upon many factors, including the ability of the Company to: (i) successfully open additional retail stores in existing and satellite markets; (ii) successfully enter new markets in which the Company has no previous retail experience; (iii) negotiate acceptable lease terms for additional store locations; (iv) effectively hire, train, manage and retain qualified management and other personnel; and (v) successfully integrating acquisitions into the Company’s business and operations. There can be no assurance that the Company will be able to grow at the rate contemplated by its growth strategy, that new stores will be effectively integrated into the Company's existing operations and that such stores will be profitable.

There can be no assurance that the Company will be successful in implementing its growth strategy or, even if implemented, that it will have the intended results. Failure to successfully execute any material part of the Company's growth strategy could have a material adverse effect on the Company's business, financial condition, liquidity and results of operations.

Fluctuations in same store sales The Company's same store sales have fluctuated in the past for its Banners. There can be no assurance that the Company's same store sales results will not decline in the future. A variety of factors affect the same store sales, including: (i) levels of consumer awareness of products, brand name and store locations; (ii) same store sales performance in prior periods; (iii) the timing of new and relocated store openings, the relative proportion of new and relocated stores to mature stores and cannibalization resulting from the opening of new stores in existing markets; (iv) the amount, timing and relative success of promotional events, advertising expenditures, new product introductions and product line extensions; (v) the quality and tenure of regional and store-level managers and sales associates; (vi) the amount of competitive activity; (vii) the evolution of store operations; and (viii) general economic conditions and consumer confidence.

Decreases in same store sales could have a material adverse effect on the Company's business, financial condition, liquidity and results of operations.

Damage to the Company's reputation Consumers associate the Company with a high level of customer service and quality. Failure to maintain merchandise quality and integrity, or ethical and socially responsible operations could adversely affect the brand image and reputation of the Company and its Banners. Any negative publicity about, or significant damage to the Company's brand or reputation could negatively impact revenues, reduce employee morale and productivity and diminish customer trust, any of which could harm the Company's business, financial condition and results of operations. In those circumstances, it may be difficult and costly for the Company to regain customer confidence. Furthermore, damage to the reputation of any supplier or manufacturer of the Company's products, could negatively impact consumer opinion of the Company and its Banners, which could have a material adverse effect on our business and results of operations.

- 17 -

There has been a marked increase in the use of social media platforms and similar channels, including web logs (blogs), social media websites and other forms of Internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. The availability and impact of information on social media platforms is virtually immediate and many social media platforms publish user-generated content without filters or independent verification as to the accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning the Company or its Banners may be posted on such platforms at any time. Information posted may be adverse to the Company's interests or may be inaccurate, each of which may harm the Company's performance, prospects, reputation or business. The harm may be immediate without affording the Company an opportunity for redress or correction. Ultimately, the risks associated with any such negative publicity or incorrect information cannot be completely eliminated or mitigated and may materially harm the Company's reputation, business, financial condition and results of operations.

Competition The retail mattress and complementary sleep related products and accessories industry in Canada is highly competitive. Participants in the bedding industry compete primarily based on store location, service, price, product selection, brand name recognition and advertising. There can be no assurance that the Company will be able to continue to compete favourably with its competitors in these areas. The top eight retailers in the industry in Canada include Sleep Country / Dormez-vous?, Leon's / The Brick, Hudson's Bay, BMTC, IKEA, Amazon, Casper and Costco. The remaining industry sales are highly fragmented amongst a number of smaller mattress specialty stores, other furniture stores and small independent retailers. Additionally, retail furniture stores may open retail locations specifically targeted for specialty bedding as a way to directly compete with the Company and other specialty retailers. Certain of the Company's competitors may have substantially greater financial, marketing and other resources. Accordingly, the Company may face periods of intense competition in the future that could have a material adverse effect on its planned growth and future results of operations. Competition in existing and new markets may also prevent or delay the Company's ability to gain relative market share. Any of the developments described above could have a material adverse effect on the Company's planned growth and future results of operations.

Although management currently believes that, compared to other retail categories, the mattress industry is not as vulnerable to show-rooming or online shopping, there can be no assurance that this will continue in the future. The Company currently experiences competition from Amazon Canada, Casper Sleep Inc., and Novosbed Inc., as well as a number of other online mattress companies in the USA, that ship their product into Canada. The Company launched its eCommerce website in May 2017 and completed the Endy acquisition in November 2018. Existing competitors may start offering mattresses, boxsprings and complementary sleep related products and accessories online or may expand their existing internet- based businesses. New competitors that offer online sales may also enter the market. An increase in internet- based competition for mattresses, boxsprings and complementary sleep related products and accessories could have a material adverse effect on the Company's business, financial condition, liquidity and results of operations.

In addition, U.S. and international retailers are increasingly entering the Canadian retail market, which has created additional competitive challenges for Canadian-based retailers like Sleep Country that are principally dependent upon the Canadian market. If new competitors enter the Canadian retail mattress and complementary sleep related products and accessories market, it may adversely affect the Company's sales and reduce the Company's market share, which could in turn have a material adverse effect on the Company's business, financial condition, liquidity and results of operations.

- 18 -

Seasonality and weather Retail mattress sales are subject to seasonal fluctuations in demand with the highest levels of sales occurring in the third and fourth quarters. Variable costs, including certain selling costs and expenses, and to some extent, employee wages, can be managed to match seasonal patterns. However, a significant portion of retail costs, including rent, are fixed and cannot be adjusted for seasonality. Unusual weather patterns may also affect sales.

Business Continuity The Company’s ability to continue critical operations and processes could be negatively impacted by adverse events resulting from various incidents, including severe weather, work stoppages, prolonged IT systems failure, terrorist activity, power failures, border closures or a pandemic or other national or international catastrophe. The Company has business continuity plans in place to manage any such events. Despite this, ineffective contingency planning, business interruptions, crises or potential disasters could adversely affect the reputation, operations or financial performance of the Company.

Real estate The Company faces competition for retail locations from other retail market participants. All of the Company's store locations and distribution centres are leased. The Company's ability to re-negotiate favourable terms on an expiring lease or to negotiate favourable terms for a suitable alternate location and the Company's ability to negotiate favourable lease terms for additional store locations could depend on conditions in the real estate market, competition for desirable properties, the Company's relationships with current and prospective landlords or on other factors that are not within the Company's control. Any or all of these factors and conditions could negatively impact the Company's growth and profitability.

Dependence on key personnel The Company's success depends in part on its ability to attract and retain key executive, merchandising, marketing and sales personnel. The Company's executive officers include David Friesema, the Chief Executive Officer, and Stewart Schaefer, President of Dormez-vous? and Chief Business Development Officer, each of whom has entered into an employment agreement with the Company. If these executive officers or other members of senior management cease to be employed by the Company, the Company would have to hire additional qualified professionals. The Company's ability to successfully hire other experienced and qualified professionals cannot be assured and may be difficult because the Company faces competition for these professionals from its competitors, its suppliers and other companies operating in its industry. As a result, the loss or unavailability of any of the Company's executive officers could have a material adverse effect on the Company.

Employee Attraction, Development and Succession Planning The Company’s operations and continued growth are dependent on its ability to hire, retain and develop its leaders and other key personnel. Any failure to effectively attract talented and experienced colleagues and to establish adequate succession planning and retention strategies could result in a lack of requisite knowledge, skill and experience. This could erode the Company’s competitive position or result in increased costs, competition for or high turn-over of colleagues. Any of the foregoing could negatively affect the Company’s ability to operate its business, which in turn could adversely affect the Company’s reputation, operations or financial performance.

- 19 -

Labour relations With the exception of unionized distribution centers in Greater Vancouver, Victoria and Brampton representing 87 individuals in the aggregate, the remainder of the Company's employees are not unionized. The current agreement with Retail Wholesale Union Local 580 covering the Greater Vancouver and Victoria sites was renewed on January 1, 2018 for a four-year term expiring December 31, 2021. The current agreement with the Workers United Canada Council, on its own behalf and on behalf of its Local 2757, in respect of the Brampton site was signed on January 28, 2019 for a three-year term expiring on January 13, 2022. Currently, labour relations are good. However, the maintenance of a productive and efficient labour environment or the successful renegotiation of the collective agreements cannot be assured. If protracted and extensive work stoppages occur, labour disruptions such as strikes or lockouts could have a material adverse effect on the Company's business and financial results.

Relationship with suppliers The Company's principal suppliers are Tempur-Sealy®, Serta®, Simmons®, Kingsdown® and Dormeo® among others. The Company's current suppliers may not continue to sell products to it on acceptable terms or at all, and the Company may not be able to establish relationships with new suppliers to ensure delivery of products in a timely manner or on terms acceptable to it. The Company may not be able to acquire desired merchandise in sufficient quantities on terms acceptable to it in the future. The Company is also dependent on suppliers for assuring the quality of merchandise supplied to it. The Company's inability to acquire suitable merchandise in the future or the loss of one or more of the Company's suppliers and the Company's failure to replace them may harm the Company's relationship with its customers and the Company's ability to attract new customers, resulting in a decrease in revenue. Furthermore, the Company's ability to continue to attract and retain popular brands that are favoured by consumers is important to the Company's ability to respond to consumer preferences. If suppliers of popular brands cease doing business with the Company, or the terms and conditions with such suppliers (including supplier allowances and product cost) change materially, including the Company's ability to be an exclusive seller of certain brands, the Company's results could be adversely affected. The Company does not have long-term contracts with suppliers and therefore the Company's ability to continue to sell brands that are popular with consumers and, if applicable, to have exclusivity of certain brands, are dependent on ongoing positive relationships with its suppliers.

As a result of the large volume of the Company's business with a limited number of suppliers and the Company's use of their branding in its marketing initiatives, the Company's success depends on the continued popularity and reputation of these suppliers. Any (i) deterioration of their brand image, (ii) reduction in supplier incentives, (iii) an adverse change in their financial condition, production efficiency, product development or marketing capabilities, or (iv) deterioration in the Company's relationship with any of them could adversely affect the Company's own brand and the level of the Company's customers' satisfaction, among other things, which could have a material adverse effect on the Company's business, financial condition, liquidity and results of operations.

Merchandise is sourced domestically in Canada as well as from countries around the world (including the United States, China, Italy and Spain). The Company’s use of third-party suppliers outside of Canada exposes the Company to various risks, including currency fluctuations, political instability, civil unrest and economic instability, greater difficulty enforcing intellectual property rights and potentially weaker laws protecting such rights, requirements to comply with different laws in varying jurisdictions, which laws may dictate that certain practices that are acceptable in some jurisdictions are not acceptable in others, and changes in governmental policies, natural disasters and greater difficulty and expense in recovering from them, difficulties in moving materials and products from one country to another, including port congestion, strikes and other transportation delays and interruptions, difficulties in controlling the

- 20 - quality of raw materials and components used in the manufacturing of merchandise, which may lead to public health and other concerns regarding the merchandise, changes in international labour costs, labour strikes, disruptions or lock-outs; and the imposition of tariffs or other protectionist measures, or the breakdown of trade relations. If any of these risks were to materialize, the Company’s business, financial condition and performance could be significantly and materially harmed.

Service Providers The Company has a wide range of key business relationships with third parties including vendors, suppliers, distributors and contractors. The Company relies on vendors, including offshore vendors in both mature and developing markets, to provide the Company with goods and services. Offshore sourcing increases certain risks to the Company, including risks associated general merchandise product defects, non-compliance with ethical and safe business practices and inadequate supply of products. The Company has no direct influence over how vendors are managed. Negative events affecting vendors or inefficient, ineffective or incomplete vendor management strategies, policies and/or procedures could adversely impact the Company’s reputation and impair the Company’s ability to meet customer needs or control costs and quality, which could adversely affect the reputation, operations or financial performance of the Company.

The Company relies on service providers including transport carriers, logistic service providers and operators of warehouses and distribution facilities. Ineffective selection, contractual terms or relationship management could impact the Company’s ability to source merchandise, to have products available for customers, to market to customers or to operate efficiently and effectively. Disruption in services from suppliers could interrupt the delivery of merchandise to stores, which in turn could adversely affect the operations or financial performance of the Company.

Intellectual property The Company continually develops and improves its brand recognition, which has been an important factor in maintaining its competitive position. No assurance can be given that others will not independently develop substantially similar branding. The Company takes all commercially reasonable steps to protect its proprietary rights, trademarks, copyrights, trade secrets, confidentiality procedures, and contractual provisions. Despite the Company's efforts to protect its proprietary rights, unauthorized parties may attempt to obtain and use information that the Company regards as proprietary. Stopping unauthorized use of the Company's proprietary rights may be difficult, time-consuming and costly. There can be no assurance that the Company will be successful in protecting its proprietary rights and, if it is not, its business, financial condition, liquidity and results of operations could be materially adversely affected.

Dependence on distribution centres and timely delivery to customers An important part of the Company's success is due to its ability to deliver mattresses and complementary sleep related products and accessories quickly to the Company's customers. This in turn is a result of the Company's successful planning and distribution infrastructure, including merchandise ordering, transportation and receipt processing, the ability of the Company's suppliers to meet its distribution requirements and the ability of the Company's employees to meet its delivery requirements. The Company's ability to maintain this success depends on the continued identification and implementation of improvements to its planning process, distribution infrastructure and supply chain. The Company also needs to ensure that its distribution infrastructure and supply chain keep pace with its anticipated growth and increased number of stores. The cost of these enhanced processes could be significant and any failure to maintain, grow or improve them could adversely affect the Company's operating results. The Company's business could also be adversely affected if there are delays in product shipments due to freight difficulties, difficulties of the Company's suppliers or contractors involving strikes or other difficulties at their principal transport providers or otherwise, including unforeseen disruptions in operations due to fire, severe weather

- 21 - conditions, natural disasters, or other catastrophic events. Additionally, freight cost is impacted by changes in fuel prices. Fuel prices affect freight cost both on inbound freight from suppliers to the distribution centres and outbound freight from the distribution centres to the Company's stores and customers.

Inventory Management The Company is subject to risks associated with managing its inventory. Failure to successfully manage such risks could result in shortages of inventory, or excess or obsolete inventory which cannot be sold profitably or increases in levels of inventory shrink. Any of these outcomes could adversely affect the financial performance of the Company. Although the Company has implemented new IT systems, which are intended to provide increased visibility to integrated costing and sales information at store level, the Company’s failure to effectively implement such new IT systems and applicable processes may increase the risks associated with managing inventory, including the risk that inaccurate inventory could result in inaccurate financial statements.

The Company’s is also examining its fundamental processes related to article lifecycle management, with the goal of making existing processes more efficient. This will impact existing workflow and system processes across procurement, supply chain and merchandising. Such simplification and efficiency processes are critical to the organization’s ability to integrate towards longer term system solutions and achieve efficiencies across the Retail banners. Any failure to effectively deliver this enterprise core solution could negatively impact the Company’s operations or financial performance.

Dependence on Enterprise Resource Planning (“ERP”) system The Company depends on its ERP system in each stage of the sale of its products, including entering the customer's order, determining availability of product, arranging the optimal delivery times, inventory management, and providing after-sales service. In addition, the ERP system forms the basis of the Company's financial reporting. If irreparable damage were caused to the ERP system and its databases or the information contained in the ERP system were lost, the business, financial condition, liquidity and results of operations could be adversely affected. The company has a disaster recovery plan in place to prevent loss of data and operational disruptions from an ERP system failure.

IT Systems Implementations and Data Management The Company continues to undertake investments in new IT systems to improve the operating effectiveness of the organization. Failure to successfully migrate from legacy systems to the new IT systems or a significant disruption in the Company’s current IT systems during the implementation of new systems could result in a lack of accurate data to enable management to effectively manage day-to-day operations of the business or achieve its operational objectives, causing significant disruptions to the business and potential financial losses.

Failure to successfully adopt or implement appropriate processes to support the new IT systems, or failure to effectively leverage or convert data from one system to another, may preclude the Company from optimizing its overall performance and could result in inefficiencies and duplication in processes, which in turn could adversely affect the reputation, operations or financial performance of the Company. Failure to realize the anticipated strategic benefits including revenue growth, anticipated cost savings or operating efficiencies associated with the new IT systems could adversely affect the reputation, operations or financial performance of the Company.

- 22 -

The Company also depends on relevant and reliable information to operate its business. As the volume of data being generated and reported continues to increase across the Company, data accuracy, quality and governance are required for effective decision making. Failure by the Company to leverage data, including customer data, in a timely manner may adversely affect the Company’s ability to execute its strategy and therefore its financial performance.

Internet, Privacy, Confidentiality and Cyber Security In the normal course of its business, the Company collects, processes and retains sensitive and confidential customer information. Despite the security measures the Company has in place, the Company's facilities and systems, and those of its third-party service providers, may be vulnerable to security breaches, hacking, computer viruses, misplaced or lost data, programming and/or human errors and other similar events. Any security breach involving the misappropriation, loss or other unauthorized use or disclosure of confidential information, whether by the Company or its vendors, could damage the Company's reputation and its relationships with its customers, expose the Company to risks of litigation and liability and may have a material adverse effect on the Company's business, including the inability to process customer transactions, inability to deliver products to customers and disruptions to inventory management. The company has a disaster recovery plan in place and has information technology security controls in place to prevent unauthorized access to the Company's internal network. The Company does not maintain insurance coverage for cyber security incidents.

Governance, Change Management, Process and Efficiency Many initiatives are underway to reduce the complexity and cost of the Company’s business operations, ensuring a low cost operating structure that allows for continued investments in the Company’s strategic growth areas. These efforts include initiatives focused on improving processes and generating efficiencies across its administrative, store and distribution network infrastructures. The success of these initiatives is dependent on effective leadership and realizing intended benefits. Ineffective change management could result in a lack of integrated processes and procedures, unclear accountabilities and decision-making rights, decreased colleague engagement, ineffective communication and training or a lack of requisite knowledge. Any of the foregoing could disrupt operations, increase the risk of customer dissatisfaction, adversely affect the Company’s reputation or financial performance or adversely affect the ability of the Company to implement and achieve its long-term strategic objectives.

Insurance The Company maintains insurance coverage in respect of its potential liabilities and the accidental loss of value of its assets from risks, in amounts, with such insurers, and on such terms as it considers appropriate, taking into account all relevant factors. However, there are certain types of losses, generally of a catastrophic nature, such as earthquakes and floods that may be uninsurable or not economically insurable. The Company will use its discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to maintaining appropriate insurance coverage on the Company's assets and the business at a reasonable cost and on suitable terms. This may result in insurance coverage that, in the event of a substantial loss, would not be sufficient to pay the full current market value or current replacement cost of the Company's lost investment. Certain factors also might make it unattractive to use insurance proceeds to replace the property after such property has been damaged or destroyed. Under such circumstances, the insurance proceeds received by the Company might not be adequate to restore its economic position with respect to such property. There are no assurances that the Company's insurance coverage will continue to be available to it on reasonable terms, including reasonable premium, deductible and co-insurance requirements or that the Company's insurer will not disclaim coverage of any future claim. The Company's business, financial condition, liquidity and results of operations could be materially adversely affected if any of the foregoing developments were to occur.

- 23 -

Comfort and price guarantees Generally, the Company provides its customers with a 100-day comfort guarantee whereby, within 100 days from the date of original purchase, if the customer is not satisfied with the new mattress, the Company will exchange it one time for a mattress of equal or similar quality with an exchange fee, subject to standard transportation charges. Additionally, the Company provides its customers with a low price guarantee whereby if a customer finds the same or comparable sleep set advertised for less than the Company's displayed or advertised price within 100 days of purchase, the Company will beat its competitor's advertised price on such comparable sleep set by 5% and refund the customer the difference. The Company establishes reserves relating to its customer satisfaction programs based on historical experience. An increase in comfort exchange return rates or refunds could have a material adverse effect on the Company's business, financial condition and results of operations.

Debt covenants in Credit Facility The Credit Facility contains negative covenants that limit the ability of the Company and SCCI to engage in specified types of transactions. These covenants limit the ability of the Company and SCCI to, among other things, incur indebtedness; create liens; engage in mergers or consolidations; sell assets (including pursuant to sale and leaseback transactions); pay dividends or repurchase securities; make investments, acquisitions, loans or advances; repay, prepay or redeem certain indebtedness; engage in certain transactions with affiliates; amend material agreements governing certain indebtedness; and change the Company's lines of business.

A breach of any of these covenants could result in an event of default under the Credit Facility. Upon the occurrence of an event of default under the Credit Facility, the lenders may have the ability to elect to declare all amounts outstanding under such facility to be immediately due and payable and terminate all commitments to extend further credit, or seek amendments to the debt agreements that would provide for terms more favourable to such lenders. If the Company or SCCI is unable to repay those amounts, the lenders under the Credit Facility may be entitled to proceed against the collateral granted to them to secure that indebtedness.

Dependence on operating subsidiary The Company is a holding company with no business operations of its own or material assets other than the shares of SCCI and Endy and intercompany borrowings to SCCI and Endy. Accordingly, all of the Company's operations are conducted by the Company's subsidiaries, namely SCCI and Endy. As a holding company, the Company requires dividends and other payments from its subsidiaries to meet cash requirements. While the Company presently intends to pay dividends to holders of Common Shares and anticipates that its subsidiaries will have sufficient cash flow to enable such subsidiaries to pay dividends or otherwise distribute cash to the Company, the terms of the Credit Facility contain restrictions on the ability of its subsidiaries from paying dividends and otherwise transferring to the Company cash or other assets in certain circumstances. As such, a decline in the Company's business, financial condition, cash flows or results of operation may result in, pursuant to the terms of the Credit Facility, restrictions on its subsidiaries ability to pay dividends or otherwise distribute cash to the Company. In such event, the Company may be unable to pay a dividend to holders of Common Shares. If there is an insolvency, liquidation or other reorganization of its subsidiaries, shareholders likely will have no right to proceed against the assets of the subsidiaries. Creditors of the subsidiaries will be entitled to payment in full from the sale or other disposal of the assets of the respective subsidiaries before the Company, as an equity holder, would be entitled to receive any distribution from that sale or disposal. If the subsidiaries are unable to pay dividends or distributions or make other payments to the Company when needed, the Company will be unable to pay dividends or satisfy the Company's obligations.

- 24 -

Risks Related to the Endy Acquisition The Endy acquisition was based largely on economic assessments made by the Company and its financial advisors. These assessments include a series of assumptions regarding various factors many of which are subject to change and beyond the Company’s control. All such assessments involve a measure of uncertainty that could result in lower revenue or higher operating or capital expenditures than anticipated.

Although the Company conducted significant financial and legal due diligence in the course of its consideration of such acquisition, there may be liabilities that the Company failed to discover or were unable to appropriately quantify in the course of due diligence, and for which the Company may not be indemnified. The discovery or quantification of any material liabilities could have a material adverse effect on the Company’s business, financial condition or future prospects. In addition, the definitive agreement for the acquisition limits the amount for which the Company is indemnified, such that liabilities in respect of such acquisition may be greater than the amounts for which the Company is indemnified under the agreement.

The Company expects that the acquisition will provide a number of benefits to the Company. However, there is a risk that some or all of the expected benefits of the acquisition may fail to materialize, may cost more to achieve or may not occur within the time periods that the Company anticipates. The realization of such benefits may be affected by a number of factors, many of which are beyond the control of the Company.

Fluctuations in product cost, inflation and foreign currency The Company's results may be affected by the prices of the components used in the manufacture of the mattress and complementary sleep related products and accessories it sells. These prices may fluctuate based on a number of factors beyond the Company's control, including: oil prices and other energy related costs, changes in supply and demand, general economic conditions, labor costs, competition, import duties, tariffs, currency exchange rates and government regulation. These fluctuations may result in an increase in the Company's transportation costs for distribution, utility costs for retail stores and overall costs to purchase products from suppliers.

The Company may not be able to adjust the prices of its products, especially in the short-term, to recover these cost increases. A continual rise in product costs could adversely affect consumer spending and demand for the Company's products and increase its operating costs, both of which could have a material adverse effect on the Company's financial condition and results of operations. The Company's operating results are reported in Canadian dollars. A portion of the Company's merchandise purchases are denominated in U.S. dollars which results in foreign currency exposure related to fluctuations between the Canadian and U.S. dollars. The Company does not currently use foreign exchange option or forward contracts to hedge its foreign currency risk relating to merchandise purchases. A sudden increase in the U.S. dollar relative to the Canadian dollar could result in higher costs to the Company, which could in turn result in increased prices, reduced sales and decreased profit margins and could negatively impact the Company's business and financial results. The Company's revolving credit facility allows the Company to borrow in Canadian and U.S. dollars. To mitigate any foreign exchange risk related to its U.S. dollar denominated debt, the Company enters into forward foreign exchange contracts to sell U.S. dollars in an amount equal to the principal amount of its U.S. dollar denominated borrowings.

- 25 -

Legal proceedings The Company and its subsidiary may become, in the ordinary course of its business, a party to litigation. The existence of such claims against the Company or its affiliates, directors or executive officers could have various adverse effects, including the incurrence of significant legal expenses defending such claims, even those claims without merit. In general, litigation claims can be expensive and time consuming to bring and to defend against and could result in settlements for damages that could significantly impact the Company's business, results of operations or financial conditions. The Company's insurance coverage may not be sufficient to absorb the fees and costs related to legal proceedings and the Company may be exposed to lawsuits which could harm its reputation and keep management from growing the business. The Company from time to time is the subject of claims in respect of termination entitlements to former employees which, to date, have not been material to the Company either individually or in the aggregate.

Government regulation The Company's products and its marketing and advertising programs are and will continue to be subject to regulation by various Canadian federal, provincial and local regulatory authorities. Compliance with these regulations may have an adverse effect on the Company's business. In addition, the Company's operations are subject to Canadian federal, provincial and local consumer protection regulations, environmental laws and other laws relating specifically to the bedding industry. The Company and/or the Company's suppliers may be required to incur significant expense to the extent that these regulations change and require new and different compliance measures. For example, legislation may be enacted relating to the disposal of used mattresses which may have the effect of increasing the Company's cost of providing that service to its customers or may result in the Company being forced to discontinue that service. This may result in reduced sales and could negatively impact the Company's business and financial results. In addition, failure to comply with these various regulations may result in penalties, the inability to conduct business as previously conducted or at all, and/or adverse publicity, among other things.

The Company's ability to control its labour costs is subject to numerous external factors, including provincial legislation governing minimum wages, hours of work and termination and severance entitlements. If labour costs increase, the Company may not be able to hire or retain qualified sales associates or it may result in an increase in its operating expenses, which could negatively affect the Company's profitability.

Third-party consumer financing arrangements The Company offers financing to consumers through third-party consumer finance companies. Although the Company is not exposed to any customer credit risk, its business is affected by the availability and terms of financing to customers. A significant reduction of credit availability to the Company's customers could have a material impact on its business, financial condition, liquidity and results of operations.

The price of the Common Shares may fluctuate significantly The trading price of the Common Shares may be volatile and subject to wide price fluctuations in response to various factors, many of which are beyond the Company's control, including, but not limited to: (i) market conditions in the stock market generally or in any of its sub-sectors; (ii) actual or anticipated fluctuations in the Company's quarterly financial and operating results; (iii) developments or disputes concerning the Company's intellectual property or proprietary rights; (iv) introduction of new technologies, products or services by the Company or its competitors; (v) issuance of new or changed securities analysts' reports or recommendations; (vi) additions or departures of key personnel; (vii) regulatory developments; (viii) litigation and governmental investigations; and (ix) economic and political conditions or events.

- 26 -

These and other factors may cause the market price and demand for the Common Shares to fluctuate substantially, which may limit or prevent shareholders from readily selling Common Shares and may otherwise negatively affect the liquidity of the Common Shares. The trading price of the Common Shares may also decline in reaction to events that affect other companies in the retail mattress and complementary sleep related products and accessories industry or related industries, even if these events do not affect the Company. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of the Company's shareholders brought a lawsuit against it, the Company could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of management from the Company's business.

Forward-looking information The forward-looking information relating to, among other things, future results, performance, achievements, prospects or opportunities of the Company or the Canadian market included in this AIF is 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 the Company believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Actual results of the Company in the future may vary significantly from the historical and estimated results and those variations may be material. There is no representation by the Company that actual results achieved by the Company in the future will be the same, in whole or in part, as those included in this AIF. See "Forward-Looking Information".

Payment of dividends Payment of dividends is dependent on cash flows of the business and is subject to change. The declaration and payment of future dividends will be at the discretion of the Board of Directors, are subject to restrictions under the Credit Facility and may be affected by various other factors, including the Company's earnings, financial condition, acquisitions and legal or contractual restrictions. There can be no assurance that the Company will be in a position to pay dividends at the same rate (or at all) in the future. Moreover, there are or may be statutory, contractual, tax or other limitations on the ability of the Company's subsidiary to make distributions to the Company. If the cash the Company receives from its subsidiaries (SCCI and Endy) pursuant to such distributions is insufficient, or if its subsidiaries are unable to make such distributions, the Company may be required to raise cash through the incurrence of debt, the issuance of additional equity or the sale of assets to fund its obligations. However, there can be no assurance that the Company would be able to raise cash by any of these means in a timely manner or on terms that are favourable to the Company.

Internal control over financial reporting The Company is responsible for establishing and maintaining adequate internal control over financial reporting, which is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A failure to prevent or detect errors or misstatements may result in a decline in the Company stock price and harm its ability to raise capital.

- 27 -

Dilution The issuance of additional Common Shares may have a dilutive effect on the interests of shareholders. The number of Common Shares that the Company is authorized to issue is unlimited. The Company may, in its sole discretion, subject to applicable law and the rules of the TSX, issue additional Common Shares from time to time (including pursuant to its equity-based compensation plans), and the interests of shareholders may be diluted thereby.

Securities Analysts' Research or Reports Could Impact Price of Common Shares The trading market for the Common Shares will rely in part on the research and reports that industry or financial analysts publish about the Company or the Company's business. If one or more of the analysts covering the Company's business downgrade their evaluations of the Common Shares or share price, the price of the Common Shares could decline. If one or more of these analysts cease to cover the Common Shares, the Company could lose visibility in the market for its shares, which in turn could cause the Common Share price to decline.

MATERIAL CONTRACTS

The following is the only material contract entered into by the Company or its subsidiaries (a) during the most recently completed financial year, or (b) before the most recently completed financial year (but subsequent to January 1, 2002) that is still in effect. Copies of this material contract, including any amendments thereto, are available on SEDAR at www.sedar.com.

Credit Agreement Concurrently with the IPO, SCCI entered into a senior secured credit agreement dated as of July 16, 2015 (the "Credit Agreement") with certain Canadian Schedule I chartered banks and other financial institutions as lenders pursuant to which a revolving credit facility was established (the "Credit Facility"). The Credit Facility was scheduled to mature on July 16, 2020 and was guaranteed by the Company.

On June 29, 2016, the Credit Agreement was amended and restated and the Company became the borrower under the Credit Facility and SCCI, the wholly-owned subsidiary of the Company, became the sole guarantor. In addition, the credit limit under the Credit Facility was reduced to $150.0 million and the maturity date was extended to June 29, 2021. On August 30, 2017, the senior secured credit agreement was amended and the maturity date was extended to August 30, 2022.

On November 29, 2018, in connection with the purchase of substantially all of the operating assets of Endy, the Credit Agreement was further amended. Pursuant to this amendment, the facility was increased from $150 million to $210 million and the maturity date was extended to November 29, 2023.

The Credit Facility is secured by all of the present and after-acquired personal property of the Company, SCCI and Endy. The Company pays a quarterly commitment fee to the lenders on the unused and uncancelled portion of the commitments of each lender, as well as interest and certain other fees in respect of letters of credit under the Credit Agreement.

The Credit Agreement allows the Company to borrow in Canadian dollars by way of prime rate loans and bankers' acceptances and in U.S. dollars by way of Euribor loans and U.S. base rate loans, in each case plus the applicable margin. As at December 31, 2019, the applicable margin for bankers’ acceptances was 200 basis points and the applicable margin for prime rate loans was 100 basis points.

- 28 -

The Credit Facility is subject to a total leverage ratio test and interest coverage ratio test and includes a cross default to other indebtedness of the Company and its subsidiaries. The Company is permitted to pay dividends so long as no default or event of default has occurred and is continuing or would result from the payment. The Credit Facility is also subject to other non-financial covenants, restrictions and reporting requirements that, if breached, could cause a default under the Credit Agreement and may result in the requirement for immediate repayment of all amounts outstanding under the Credit Facility and other indebtedness under the Credit Agreement, as well as other rights and remedies of the agent and lenders.

DIRECTORS AND EXECUTIVE OFFICERS

As of the date of this AIF, the names and municipalities of residence of the current directors and executive officers of the Company, the offices held by them with the Company, their principal occupations during the five preceding years and the period each director has served as a director are set out in the table and accompanying text below. The present term of each director will expire immediately prior to the election of directors at the next annual meeting of shareholders of the Company or upon such director's successor being elected or appointed.

Common Name, Province and Shares Country of Residence Position / Title Principal Occupation(1) Held

Christine Magee Chair Chair of the Company 293,198 Ontario, Canada

J. Douglas Bradley(2) Director Corporate Director 7,470 Ontario, Canada

John Cassaday(3) Director Corporate Director 20,580 Ontario, Canada

Zabeen Hirji(4) Director Strategic Advisor 2,600 Ontario, Canada

Andrew Moor(5) Director President and Chief Executive 11,800 Ontario, Canada Officer of Equitable Bank

Stacey Mowbray(6) Director Corporate Director 2,500 Ontario, Canada

David Shaw(7) Lead Director Founder and Chair of LHH 20,580 Ontario, Canada Knightsbridge and Chair of Axsium.

David Friesema Director and Chief Chief Executive Officer of the 397,695 Ontario, Canada Executive Officer Company

- 29 -

Common Name, Province and Shares Country of Residence Position / Title Principal Occupation(1) Held

Stewart Schaefer Chief Business Chief Business Development 270,324 Québec, Canada Development Officer Officer of the Company and and President of President of Dormez-vous? Dormez-vous?

Craig De Pratto Chief Financial Officer Chief Financial Officer of the - Ontario, Canada Company

David Howcroft Chief Sales Officer Chief Sales Officer of the 20,008 Ontario, Canada Company

Sieg Will Senior Vice-President, Senior Vice-President, 59,943 Ontario, Canada Operations Operations of the Company

Notes: (1) See " – Biographical Information Regarding the Directors and Executive Officers of the Company" for the five-year history of each director and executive officer. (2) Independent Director. Chair of the Audit Committee. Member of the HR & Compensation Committee and the Nominating & Corporate Governance Committee. (3) Independent Director. Chair of the Nominating & Corporate Governance Committee. Member of the Audit Committee and the HR & Compensation Committee. (4) Independent Director. Member of the Audit Committee, the HR & Compensation Committee and the Nominating & Corporate Governance Committee. (5) Independent Director. Chair of the HR & Compensation Committee. Member of the Audit Committee and the Nominating & Corporate Governance Committee. (6) Independent Director. Member of the Audit Committee, the HR & Compensation Committee and the Nominating & Corporate Governance Committee. (7) Independent Director. Lead Director and member of the Audit Committee, the HR & Compensation Committee and the Nominating & Corporate Governance Committee.

Christine Magee and David Friesema were appointed to the Board of Directors when the Company was incorporated on May 27, 2015. Messrs. Doug Bradley, John Cassaday, Andrew Moor and David Shaw were appointed to the Board of Directors on July 16, 2015. Ms. Hirji was appointed to the Board of Directors on August 2, 2018. Ms. Mowbray was appointed to the Board of Directors on August 8, 2019.

Biographical Information Regarding the Directors and Executive Officers of the Company The following is biographical information relating to each person who is a director or executive officer of the Company as of the date of this AIF. The directors of the Company shall be elected at each annual general meeting of the shareholders of the Company held to elect directors.

Christine Magee (60) — Ms. Magee is Chair of Sleep Country. She co-founded Sleep Country in 1994 and served as its President until November 2014. Ms. Magee worked in the industry as the Commercial Accounts Manager of Continental Bank from 1982 to 1985 and as a Senior Manager of Corporate and Commercial Lending with National Bank from 1985 to 1994. She serves on the Board of

- 30 -

Directors of Metro Inc., TELUS, Trillium Health Partners, Woodbine Entertainment Group and Plan International Canada and is Chair of the Advisory Council of the Talent Fund. Ms. Magee previously served on the Board of Directors of SiriusXM Canada from January 2014 to May 2017, Richard Ivey School of Business Western University Advisory Board from June 2010 to 2017, Toronto General and Western Hospital Foundation Board from 2010 to 2015, Advisory Board for Adrenalys from May 2016 to December 2017, Cott Corporation from 2004 to 2008 and McDonald's Restaurants from 1999 to 2004. Ms. Magee received a Honourary Doctorate of Commerce from Ryerson University on June 15, 2006. She holds an HBA (Honours) from the University of Western Ontario. On July 1, 2015, Ms. Magee was appointed as a member of the Order of Canada in recognition of her significant contributions to the Canadian business community.

J. Douglas Bradley (68) — Mr. Bradley is a member of the Board of Directors of Sleep Country. He is currently a corporate director. From 2005 to 2012, he was Managing Director of Westerkirk Capital Inc., a private equity firm. Prior to that, he was Managing Director, Corporate Development of TrizecHahn Corporation from 1995 to 2002. From 1982 to 1994, Mr. Bradley was a partner of Coopers & Lybrand Chartered Accountants, a predecessor firm of PricewaterhouseCoopers LLP. Mr. Bradley has served on numerous boards during his 45-year career, most recently on the BG Fuels Advisory Board. He holds a Bachelor of Mathematics degree from the University of Waterloo and is a Chartered Professional Accountant.

John Cassaday (66) — Mr. Cassaday is a member of the Board of Directors of Sleep Country. He is currently a corporate director. Prior to April 2015, Mr. Cassaday served as President and Chief Executive Officer and as a director of Corus Entertainment Inc., a position he held since its inception in 1999. Prior to Corus, Mr. Cassaday was Executive Vice President of Shaw Communications, President and Chief Executive Officer of CTV Television Network and President of Campbell Soup Company in Canada and the United Kingdom. Mr. Cassaday is currently Chairman of Manulife Financial Corporation and Director of Sysco Corporation. He is also active in community affairs, principally with St. Michael's Hospital. Mr. Cassaday has an MBA from the Rotman School of Management at the University of Toronto, a degree of Doctor of Laws, honoris causa from the University of Toronto and is a member of the Order of Canada.

Zabeen Hirji (59) - Ms. Hirji is a member of the Board of Directors of Sleep Country. She is an Executive Advisor to Deloitte and an advisor to the public sector. Prior to that, Ms. Hirji held senior executive roles at Royal Bank of Canada, where from 2007 to 2017, she was Chief Human Resources Officer, a member of RBC’s Group Executive Committee responsible for setting its overall strategic direction and held responsibility for Brand, Communications and Corporate Citizenship. She previously held numerous management roles in Retail Banking and Operations. Ms. Hirji has served on numerous not- for-profit Boards and currently Chairs the Board of Civic Action. Over her career, she has received numerous recognitions for Business Leadership and is a recipient of Canada’s Meritorious Service Medal. Ms. Hirji holds an MBA from Simon Fraser University, where she now serves as an Executive in Residence.

Stacey Mowbray (58) - Ms. Mowbray is a member of the Board of Directors of Sleep Country. She most recently held the position of President North America with WW International (formerly Weight Watchers) where she oversaw and was a key member of the turnaround of the omni-channel health and wellness company. Prior to her work at WW, Ms. Mowbray held the position of President and CEO of Second Cup Limited from 2008 to 2014. She sat on the Second Cup Royalty Income Board 2007 to 2009. In addition from, 2008 to 2013, Ms. Mowbray was Chair and Board Director for the Coffee Association of Canada. Ms. Mowbray is currently a Board Director for Spärkel Beverage System, Currency Exchange International, the Exchange Bank of Canada and a volunteer Board Director and Vice-Chair of the Quality committee for Trillium Health Partners. She is also on the International Advisory Board for the Schulich School of Business - York University and on the Dean’s Advisory Council for Wilfrid Laurier University.

- 31 -

In addition, Ms. Mowbray has held volunteer Board Director positions at the LCBO, Association of Canadian Advertisers (ACA) and Kingsway College School. Over her career, she has received numerous recognitions including Diversity Champion, Inaugural CEO in Residence for Wilfrid Laurier, Top 100 Women’s Executive Network, Top 20 Women’s Post and Schulich School of Business Outstanding Progress and Achievement Award. She holds an MBA from the Schulich School of Business – York University.

Andrew Moor (59) — Mr. Moor is a member of the Board of Directors of Sleep Country. He joined Equitable Bank and Equitable Group as President and Chief Executive Officer in 2007. Mr. Moor is also a Director of Equitable Bank and Equitable Group. Prior to Equitable, Mr. Moor was President and CEO of Invis Inc., President of SMED International and worked as an investment banker with CIBC. Mr. Moor is a member of the Business Council of Canada, Chairman of the Trust Companies Association, a member of the Executive Council of the Canadian Bankers Association and a member of the Advisory Board of the Smith School of Business at Queen's University. He received his Master of Business Administration from the University of British Columbia, his B.Sc. in Mechanical Engineering from University College London and holds the ICD.D designation.

David Shaw (66) — Mr. Shaw is a member and the independent lead director (the "Lead Director") of the Board of Directors of Sleep Country. He is the Founder of Knightsbridge Human Capital Solutions, a national human capital firm founded in 2001 and sold in 2015. Mr. Shaw currently is Chair of LHH Knightsbridge as well as Chair of Axsium Group Ltd. Prior to founding Knightsbridge, Mr. Shaw was President and Chief Executive Officer of Pepsi Cola Canada Beverages from 1996 to 1999. Mr. Shaw's career with PepsiCo spanned 22 years within Canada and abroad in Australia, Singapore and Turkey. Mr. Shaw is the former Chairman of the North York General Hospital Foundation. He currently sits on the Mother Parkers Tea & Coffee Inc. Board of Directors, the Princess Margaret Cancer Foundation Board and the boards of directors of two publicly traded companies — Fiera Capital Corporation and Brick Brewing Co. Limited.

David Friesema (53) — Mr. Friesema is the Chief Executive Officer of Sleep Country, a position he has held since November 2014. He has been with Sleep Country since 1995 holding numerous senior positions, including Head of Sales, General Manager and Chief Operating Officer. During his tenure, Mr. Friesema has been involved in developing many of the sales training programs, creative marketing advertisements and influencing the advanced positioning that Sleep Country enjoys in the mattress industry today. Prior to joining Sleep Country, Mr. Friesema helped establish and manage mattress retail organizations in the United States. He is currently a director of Drug Free Kids Canada, formerly the Chairman of the Better Sleep Council of Canada and is a past board member of Shelternet for Abused Women. He attended the University of Detroit and the University of Missouri-St. Louis.

Stewart Schaefer (54) — Mr. Schaefer is the Chief Business Development Officer for Sleep Country & President of Dormez-vous. In his role, he oversees and directs the Company's goals in Real Estate, Merchandising, Marketing, eCommerce and all M&A. Mr. Schaefer founded Dormez-vous? in 1994 and grew the business to five stores before being acquired by Sleep Country in 2006. In 1992, Mr. Schaefer co-founded Heritage Classic Beds, a manufacturer and distributor of iron and brass beds. From 1986 to 1992, he trained and worked as a commodity broker in Chicago, later returning to Montreal to work at Dean Witter Reynolds and Refco Futures. Mr. Schaefer studied Finance and Marketing at Concordia University in Montreal.

Craig De Pratto (36) - Mr. De Pratto is the Chief Financial Officer for Sleep Country. Formerly CFO for Freshii Inc. from 2014 to 2019; he played a central role throughout a period of rapid growth and successfully guided the company through their Initial Public Offering in 2017. Mr. De Pratto has held

- 32 - various progressive executive positions at Freeze-Dry Foods Limited (2011 – 2014) and the public accounting firm BDO Canada LLP (2006 to 2011). Mr. De Pratto is a graduate of Brock University and holds a Chartered Professional Accountant and Chartered Accountant Designation.

David Howcroft (49) — Mr. Howcroft is the Chief Sales Officer for Sleep Country. He has been with Sleep Country since 1996 and during his tenure has created numerous programs to consistently build, develop and motivate a first-class sales team. He is also instrumental in developing and implementing various sales workshops, training programs / sales processes and is responsible for merchandising of the Mattress Division. Mr. Howcroft brings with him over 20 years of retail sales experience, his ability to conceive of new sales strategies and a well-recognized ability to mentor and motivate.

Sieg Will (54) — Mr. Will is the Senior Vice President of Operations for Sleep Country, a position he has held since 2012. He has been with Sleep Country since 2001 and during his tenure he has been promoted into positions of greater responsibility within the organization. He played an instrumental role in the development and implementation of standard operating policies and procedures across the organization while adopting a continuous improvement approach to conducting business. Prior to joining Sleep Country, he held senior positions with Canadian Tire and PepsiCo in the sales, operations and account management areas. Mr. Will sits on the Humber College Supply Chain Advisory Board as co-Chair, is a Team Leader for Sleeping Children Around the World and an Ambassador for the Pinehurst Club Breakfast. He graduated from the University of Guelph with a B.A. (Honours), studied at Wilfrid Laurier for a business diploma and attended the Schulich School of Business for his Master's Certificate in Supply Chain Management. He also has a Professional Logistics Designation from the Logistics Institute.

As at the date of this AIF, the directors and executive officers of the Company, as a group, beneficially owned, or controlled or directed, directly or indirectly, 1,160,548 (3.2%) of the Common Shares.

To the best of the Company's knowledge, after having made due inquiry, other than as disclosed below:

(a) no director or executive officer of the Company was, as of the date of this AIF, or had been, within 10 years before the date of this AIF, a director, chief executive officer or chief financial officer of any company that, (i) was subject to a cease trade order, an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation, in each case for a period of more than 30 consecutive days (each an "order") that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer; or (ii) was subject to an order that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer;

(b) no director, executive officer, or shareholder holding a sufficient number of shares of the Company to affect materially the control of the Company (a "Significant Shareholder") was, as of the date of this AIF, or had been within 10 years before the date of this AIF, a director or executive officer of any company that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets;

- 33 -

(c) no director, executive officer or Significant Shareholder of the Company had, within 10 years before the date of this AIF, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder; and

(d) no personal holding company of any director, executive officer or Significant Shareholder of the Company was or had been, as applicable, subject to the foregoing during the applicable time periods.

MARKET FOR SECURITIES

The Company's common shares are listed on the TSX under the trading symbol "ZZZ". The following table sets forth, for the periods indicated, the reported high and low trading prices and the total trading volume of the Common Shares on the TSX on a monthly basis, for each of the months during the period commencing on January 1, 2019 and ending on December 31, 2019:

Period High Low Volume Traded January 2019…………… $21.24 $18.81 2,495,904 February 2019………….. $22.70 $18.90 2,850,887 March 2019…………….. $22.05 $18.87 2,606,776 April 2019……………… $19.77 $18.40 2,052,745 May 2019………………. $19.73 $16.01 3,447,120 June 2019………………. $20.13 $18.14 1,013,546 July 2019……………….. $19.60 $17.99 1,108,470 August 2019……………. $21.50 $17.43 2,149,940 September 2019………... $22.56 $20.18 1,859,167 October 2019…………... $22.00 $19.91 3,037,890 November 2019………... $20.49 $18.48 2,684,891 December 2019………... $20.54 $19.21 1,590,372 ______Source: Bloomberg

TRANSFER AGENT AND REGISTRAR

The Company's transfer agent and registrar for the Common Shares is Computershare Investor Services Inc., 100 University Avenue, 8th Floor, North Tower, Toronto, Ontario.

INTERESTS OF EXPERTS

The consolidated financial statements of the Company for the year ended December 31, 2019 have been audited by PricewaterhouseCoopers LLP. As at December 31, 2019, PricewaterhouseCoopers LLP have advised the Company that they are independent with respect to the Company within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants.

- 34 -

ADDITIONAL INFORMATION

Additional information relating to the Company may be found on SEDAR at www.sedar.com. Additional information, including with respect to directors' and officers' remuneration and indebtedness and principal holders of Common Shares is contained in the Company's management information circular with respect to the annual general meeting of shareholders of the Company to be held on May 5, 2020. Additional financial information is provided in the Company's audited consolidated financial statements and management's discussion and analysis for the year ended December 31, 2019. A copy of such documents and of this AIF may be obtained upon request from the Secretary of the Company. The Company may require the payment of a reasonable charge if the request is made by a person who is not a holder of securities of the Company.

AUDIT COMMITTEE

Overview The Audit Committee of the Company (the "Audit Committee") oversees the accounting and financial reporting practices and procedures of the Company and the audits of the Company's financial statements. The Audit Committee's purpose and responsibilities include oversight of: (i) the integrity of Sleep Country's accounting and financial reporting systems, including those used in connection with the preparation of its financial statements, budgets and forecasts; (ii) the adequacy of Sleep Country's internal controls over financial reporting and disclosure controls and procedures; (iii) Sleep Country's compliance with legal and regulatory requirements; (iv) the appointment of the external auditor and the external auditor's qualifications and independence; and (v) the performance of Sleep Country's internal audit function and the external auditor; (vi) Sleep Country's risk management procedures; (vii) all related party transactions in which Sleep Country is involved or proposes to be involved; and (viii) improprieties or suspected improprieties with respect to accounting and other matters that affect financial reporting. The Board of Directors has delegated to the Audit Committee the approval of the Company's quarterly results, as permitted by applicable securities legislation. The Audit Committee has the authority to communicate directly with the external auditor of the Company.

Audit Committee Charter A copy of the charter of the Audit Committee is attached to this AIF as Appendix "A".

Composition of the Audit Committee The Audit Committee has been structured to comply with National Instrument 52-110 – Audit Committees ("NI 52-110"). The Audit Committee is comprised of Douglas Bradley (Chair), Andrew Moor, John Cassaday, Zabeen Hirji, Stacey Mowbray and David Shaw. Each member of the Audit Committee is financially literate within the meaning of NI 52-110. In addition, each member of the Audit Committee is independent within the meaning of NI 52-110.

Relevant Education and Experience For the relevant education and experience of each of the members of the Audit Committee, please see "Directors and Executive Officers — Biographical Information Regarding the Directors and Officers of the Company".

- 35 -

Pre-Approval Policies and Procedures The Audit Committee Charter sets out procedures regarding the provision of non-audit services by the Company's independent registered chartered accountants. This policy encourages consideration of whether the provision of services other than audit services is compatible with maintaining the auditor's independence and requires Audit Committee pre-approval of permitted non-audit and non-audit-related services.

External Auditor Service Fees (By Category) The following chart summarizes the aggregate fees billed by PricewaterhouseCoopers LLP, the external auditor of the Company, for professional services rendered to the Company for the fiscal years ended December 31, 2019 and December 31, 2018 for audit and non-audit related services:

Audit Fees Audit-Related Fees Tax Fees Other Fees

2019…………………. 692,800

2018………………….. 431,025 127,209 18,675 63,000

APPENDIX A

CHARTER OF THE AUDIT COMMITTEE

OF SLEEP COUNTRY CANADA HOLDINGS INC.

GENERAL

1. PURPOSE AND RESPONSIBILITIES OF THE COMMITTEE

1.1 Purpose

The primary purpose of the Committee is to assist Board oversight of:

(a) the integrity of the Corporation's accounting and financial reporting systems, including those used in connection with the preparation of its financial statements, budgets and forecasts;

(b) the adequacy of the Corporation's internal controls over financial reporting and disclosure controls and procedures;

(c) the Corporation's compliance with legal and regulatory requirements;

(d) the appointment of the External Auditor and the External Auditor's qualifications and independence;

(e) the performance of the Corporation's internal audit function and the External Auditor;

(f) the Corporation's risk management procedures;

(g) all related party transactions the Corporation is involved or proposes to be involved in;

(h) improprieties or suspected improprieties with respect to accounting and other matters that affect financial reporting; and

(i) such other matters as are set out in this Charter or as may otherwise be assigned to the Committee by the Board from time to time.

2. DEFINITIONS AND INTERPRETATION

2.1 Definitions

In this Charter:

(a) "Board" means the board of directors of the Corporation;

(b) "Chair" means the chair of the Committee;

(c) "Committee" means the Audit Committee of the Board;

(d) " Nominating and Corporate Governance Committee" means the Nominating and Corporate Governance Committee of the Board;

(e) "Corporation" means Sleep Country Canada Holdings Inc.;

(f) "Director" means a member of the Board;

(g) "External Auditor" means the Corporation's independent auditor; and

(h) "Shareholders" means the shareholders of the Corporation.

Interpretation

The provisions of this Charter are subject to the provisions of the articles and by-laws of the Corporation and to the applicable provisions of the Canada Business Corporations Act and any other applicable legislation.

CONSTITUTION AND FUNCTIONING OF THE COMMITTEE

3. ESTABLISHMENT AND COMPOSITION OF THE COMMITTEE

3.1 Establishment of the Committee

The Committee is hereby established with the constitution, function and responsibilities set forth herein.

3.2 Appointment and Removal of Members of the Committee

(a) Appointment of Members. The members of the Committee shall be appointed by the Board, having considered the recommendation of the Nominating and Corporate Governance Committee.

(b) Annual Appointments. The appointment of members of the Committee shall take place annually at the first meeting of the Board after a meeting of the Shareholders at which Directors are elected; provided, however, that if the appointment of members of the Committee is not so made, the Directors who are then serving as members of the Committee shall continue as members of the Committee until their successors are appointed.

(c) Vacancies. The Board may appoint a member to fill a vacancy which occurs in the Committee between annual elections of Directors. If a vacancy exists on the Committee, the remaining members shall exercise all of their powers so long as a quorum remains in office.

(d) Removal of Member. Any member of the Committee may be removed from the Committee by a resolution of the Board.

(e) The Committee will develop a process for assessing the individual performance of each member.

A - 2

3.3 Number of Members

The Committee shall consist of three or more Directors.

3.4 Independence of Members

Each member of the Committee shall be independent for the purposes of all applicable laws and stock exchange requirements.

3.5 Financial Literacy

(a) Financial Literacy Requirement. Each member of the Committee shall be financially literate or must become financially literate within a reasonable period of time after his or her appointment to the Committee.

(b) Definition of Financial Literacy. "Financially literate" means the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Corporation's financial statements.

(c) Continuing education and orientation. The Committee shall:

(i) Ensure that new members receive robust orientation to enable them to understand their role and get up to speed quickly; and

(ii) Ensure that all members have access to continuing education on business and accounting developments and other matters relevant to new responsibilities or changes in the business.

3.6 Qualifications

The Board will appoint to the Committee at least one Director who has accounting or financial management expertise.

4. COMMITTEE CHAIR

4.1 Board to Appoint Chair

The Board shall appoint the Chair from the members of the Committee.

4.2 Chair to be Appointed Annually

The appointment of the Committee's Chair shall take place annually at the first meeting of the Board after a meeting of the Shareholders at which Directors are elected; provided, however, that if the appointment of Chair is not so made, the Director who is then serving as Chair shall continue as Chair until his or her successor is appointed. In the Chair's absence or in the case of a position vacancy, the Committee may select another member as Chair. The Chair may exercise all powers of the Committee between meetings. Nevertheless, the Chair will reasonably involve the other members prior to exercising any power and advise them of the decisions ensuing the exercised powers.

A - 3

5. COMMITTEE MEETINGS

5.1 Quorum

A quorum of the Committee shall be a majority of the members.

5.2 Secretary

The Chair shall designate from time to time a person who may, but need not, be a member of the Committee, to act as secretary of the Committee. The secretary shall keep minutes of meetings that provide accurate descriptions of meetings, at the right level of detail. The Committee shall approve the minutes in a timely manner.

5.3 Time and Place of Meetings

The time and place of the meetings of the Committee and the calling of meetings and the procedure in all things at such meetings shall be determined by the Committee; provided, however, that the Committee shall meet at least quarterly.

5.4 In Camera Meetings

As part of each meeting of the Committee at which the Committee recommends that the Board approve the annual audited financial statements of the Corporation or at which the Committee approves the quarterly financial statements of the Corporation, the Committee shall meet separately with each of:

(a) the relevant members of the senior management team;

(b) the External Auditor;

(c) the internal auditor;

(d) the Chief Financial Officer; and

(e) privately with just Committee members.

5.5 Right to Vote

Each member of the Committee shall have the right to vote on matters that come before the Committee.

5.6 Voting

Any matter to be determined by the Committee shall be decided by a majority of votes cast at a meeting of the Committee called for such purpose. Actions of the Committee may be taken by an instrument or instruments in writing signed by all of the members of the Committee, and such actions shall be effective as though they had been decided by a majority of votes cast at a meeting of the Committee called for such purpose.

A - 4

5.7 Invitees

The Committee may invite any Directors, officers or employees of the Corporation or any other person to attend meetings of the Committee to assist in the discussion and examination of the matters under consideration by the Committee. The External Auditor shall receive notice of each meeting of the Committee and shall be entitled to attend any such meeting at the Corporation's expense.

5.8 Regular Reporting

The Committee shall report to the Board, at the Board's next meeting, the proceedings at the meetings of the Committee and all recommendations made by the Committee at such meetings.

6. AUTHORITY OF COMMITTEE

6.1 Retaining and Compensating Advisors

The Committee shall have the authority to retain independent counsel and any other advisors as the Committee may deem appropriate in its sole and absolute discretion and to set the compensation for any advisors employed by the Committee. The Committee shall not be required to obtain the approval of the Board in order to retain or compensate such counsel or other advisors.

6.2 Funding

(a) The Committee shall have the authority to authorize the payment of:

(b) compensation to any external auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Corporation;

(c) compensation for any counsel or other advisors employed by the Committee; and

(d) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

6.3 Subcommittees

The Committee may form and delegate authority to subcommittees if deemed appropriate by the Committee.

6.4 Recommendations to the Board

The Committee shall have the authority to make recommendations to the Board, but shall have no decision-making authority other than as specifically contemplated in this Charter.

6.5 Communication

The Committee has the authority to communicate directly with the External Auditor and the internal auditor of the Corporation.

A - 5

7. REMUNERATION OF COMMITTEE MEMBERS

7.1 Remuneration of Committee Members

Members of the Committee and the Chair shall receive such remuneration for their service on the Committee as the Board may determine from time to time, having considered the recommendation of the Nominating and Corporate Governance Committee.

7.2 Directors' Fees

No member of the Committee may earn fees from the Corporation or any of its subsidiaries other than Directors' fees (which fees may include cash and/or shares, options or other equity securities, or other in-kind consideration ordinarily available to Directors, as well as all of the regular benefits that other Directors receive). For greater certainty, no member of the Committee shall accept, directly or indirectly, any consulting, advisory or other compensatory fee from the Corporation.

SPECIFIC DUTIES AND RESPONSIBILITIES

8. INTEGRITY OF FINANCIAL STATEMENTS

8.1 Review and Approval of Financial Information

(a) Annual Financial Statements. The Committee shall review and discuss with the relevant members of the Corporation's senior management team and the External Auditor the Corporation's audited annual financial statements together with the notes thereto and the report of the External Auditor thereon and the related management's discussion and analysis ("MD&A") and, if appropriate, recommend to the Board that it approve the audited annual financial statements and the related MD&A.

(b) Interim Financial Statements. The Committee shall review and discuss with the relevant members of the Corporation's senior management team and the External Auditor the Corporation's interim unaudited financial statements, the notes thereto and the related MD&A and, if appropriate, approve the Corporation's interim unaudited financial statements and the related MD&A.

(c) Material Public Financial Disclosure. The Committee shall discuss with the relevant members of the Corporation's senior management team and the External Auditor:

(i) the types of information to be disclosed and the type of presentation to be made in connection with profit or loss or earnings press releases;

(ii) financial information and earnings guidance (if any) provided to analysts and rating agencies; and

(iii) press releases containing financial information.

(d) Procedures for Review. The Committee shall be satisfied that adequate procedures are in place for the review of the Corporation's disclosure of financial information extracted or derived from the Corporation's financial statements (other than financial statements, MD&A and profit or loss or earnings press releases, which are dealt with elsewhere in this Charter) and shall periodically assess the adequacy of those procedures. A - 6

(e) General. The Committee shall review and discuss with the relevant members of the Corporation's senior management team and the External Auditor:

(i) major issues regarding accounting principles and financial statement presentations, including any significant changes in the Corporation's selection or application of accounting principles;

(ii) information from the External Auditor that is required to be communicated under auditing and regulatory standards and seek insight on how the company's practices compare to those of peers

(iii) major issues as to the adequacy of the Corporation's internal controls over financial reporting and any special audit steps adopted in light of material control deficiencies;

(iv) analysis prepared by management and/or the External Auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements including, but not limited to the volume rebate and co-operative advertising accruals. The analysis should include the effects of alternative accounting methods on the financial statements;

(v) areas involving management estimates that have a material impact on the financial statements and understands the reasonableness of the underlying assumptions;

(vi) transactions that are unusual, complex or have increased in volume near period ends and their accounting treatment, evaluating appropriateness and consistency with members' knowledge of the company

(vii) the effect on the financial statements of the Corporation of regulatory and accounting initiatives, as well as off-balance sheet transaction structures, obligations (including contingent obligations) and other relationships of the Corporation with unconsolidated entities or other persons that have a material current or future effect on the financial condition, changes in financial condition, results of operations, liquidity, capital resources, capital reserves or significant components of revenues or expenses of the Corporation;

(viii) the extent to which changes or improvements in financial or accounting practices, as approved by the Committee, have been implemented;

(ix) any financial information or financial statements in prospectuses and other offering documents;

(x) the management certifications of the financial statements as required under applicable securities laws;

(xi) litigations, claims and contingencies, or other significant issues and their impact on the financial statements;

(xii) how management captures all relevant information in the financial statements, including how the management disclosure committee functions;

A - 7

(xiii) the impact of any identified subsequent events on financial disclosures;

(xiv) any significant identified errors in previously issued financial statements and management conclusions regarding the need for restatement; and

(xv) any other relevant reports or financial information submitted by the Corporation to any governmental body or the public.

9. EXTERNAL AUDITOR

9.1 External Auditor

(a) Authority with Respect to External Auditor. The Committee shall be directly responsible for the appointment, compensation and oversight of the work of the External Auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Corporation. In the discharge of this responsibility, the Committee shall:

(i) have sole responsibility for recommending to the Board the audit firm to be proposed to the Shareholders for appointment as External Auditor for the above- described purposes and recommending such External Auditor's compensation;

(ii) determine at any time whether the Board should recommend to the Shareholders that the incumbent External Auditor be removed from office;

(iii) review the terms of the External Auditor's engagement, discuss the audit fees with the External Auditor and be solely responsible for approving such audit fees;

(iv) require the External Auditor to confirm in its engagement letter each year that the External Auditor is accountable to the Board and the Committee as representatives of the Shareholders; and

(v) Review how management and the external auditors evaluate materiality, both quantitatively and qualitatively, for financial reporting purposes.

(b) Independence. The Committee shall satisfy itself as to the independence of the External Auditor. As part of this process the Committee shall:

(i) assure the regular rotation of the lead audit partner as required by law and consider whether, in order to ensure continuing independence of the External Auditor, the Corporation should rotate periodically the audit firm that serves as External Auditor;

(ii) require the External Auditor to submit on a periodic basis to the Committee a formal written statement delineating all relationships between the External Auditor and the Corporation and engage in a dialogue with the External Auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the External Auditor and recommend that the Board take appropriate action in response to the External Auditor's report to satisfy itself of the External Auditor's independence;

A - 8

(iii) unless the Committee adopts pre-approval policies and procedures, it must approve any non-audit services provided by the External Auditor; provided, however, that the Committee may delegate such approval authority to one or more of its members who shall report promptly to the Committee concerning their exercise of such delegated authority; and

(iv) review and approve the policy setting out the restrictions on the Corporation hiring partners, employees and former partners and employees of the Corporation's current or former External Auditor.

(c) Issues between External Auditor and Management. The Committee shall:

(i) review any problems experienced by the External Auditor in conducting the audit, including any restrictions on the scope of the External Auditor's activities or an access to requested information;

(ii) review any significant disagreements with management and, to the extent possible, resolve any disagreements between management and the External Auditor; and

(iii) review with the External Auditor:

(A) any accounting adjustments that were proposed by the External Auditor, but were not made by management;

(B) any communications between the audit team and audit firm's national office respecting auditing or accounting issues presented by the engagement;

(C) any management or internal control letter issued, or proposed to be issued by the External Auditor to the Corporation; and

(D) the responsibilities, budget and staffing of the Corporation's internal audit function.

(d) Non-Audit Services.

(i) Having regard to consideration of whether the provision of services other than audit services is compatible with maintain the auditor's independence, the Committee shall either:

(A) approve any non-audit services provided by the External Auditor to the Corporation or its subsidiaries; or

(B) adopt specific policies and procedures for the engagement of non-audit services, provided that such pre-approval policies and procedures are detailed as to the particular service, the Committee is informed of each non-audit service and the procedures do not include delegation of the Committee's responsibilities to management.

(ii) The Committee may delegate to one or more members of the Committee the authority to pre-approve non-audit services in satisfaction of the requirement in the A - 9

previous subparagraphs, provided that such member or members must present any non-audit services so approved to the full Committee at its first scheduled meeting following such pre-approval.

(iii) The Committee shall instruct management to promptly bring to its attention any services performed by the External Auditor which were not recognized by the Corporation at the time of the engagement as being non-audit services.

(e) Evaluation of External Auditor. The Committee shall evaluate the External Auditor each year and present its conclusions to the Board. In connection with this evaluation, the Committee shall:

(i) obtain and review a report by the External Auditor describing:

(A) the External Auditor's internal quality-control procedures;

(B) any material issues raised by the most recent internal quality-control review, or peer review, of the External Auditor's firm or by any inquiry, review, inspection or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the External Auditor's firm, and any steps taken to deal with any such issues; and

(C) all relationships between the External Auditor and the Corporation (for the purposes of assessing the External Auditor's independence);

(ii) review and evaluate the performance of the lead partner of the External Auditor; and

(iii) obtain the opinions of management and of the persons responsible for the Corporation's internal audit function with respect to the performance of the External Auditor.

(f) Review of Management's Evaluation and Response. The Committee shall:

(i) review management's evaluation of the External Auditor's audit performance;

(ii) review the External Auditor's recommendations, and review management's response to and subsequent follow-up on any identified weaknesses;

(iii) receive regular reports from management and receive comments from the External Auditor, if any, on:

(A) the Corporation's principal financial risks;

(B) the systems implemented to monitor those risks; and

(C) the strategies (including hedging strategies) in place to manage those risks; and

A - 10

10. INTERNAL CONTROL AND AUDIT FUNCTION

10.1 Internal Control and Audit

In connection with the Corporation's internal audit function, the Committee shall:

(a) Review at least annually the organizational structure of the Internal Audit function and ensure the function has sufficient stature and authority within the Company and has unfettered access and a direct reporting line to the Audit Committee;

(b) review the terms of reference of the internal auditor and meet privately with the internal auditor as the Committee may consider appropriate to ensure that the role internal audit plays meets the Committee's needs for assurance and provides value to management and to discuss any concerns or issues;

(c) approve the internal audit's charter and review annual plans and any significant changes — ensuring appropriate coverage of risks and coordination of work with external auditors;

(d) approve the annual budget of internal audit and ensure that the internal audit department has adequate resources, including quality and continuity of staff, with ability to supplement skills as needed;

(e) approve the appointment or dismissal of the Internal Auditor;

(f) annually assess the effectiveness and performance of the Internal Auditor, taking into account any regulatory findings with respect to the Internal Audit function, and provide the results to the Chief Executive Officer as input into the compensation approval process;

(g) request at least every five years an independent quality assurance review of the Internal Audit function, review the results of such reviews and report such results to the Board;

(h) in consultation with the External Auditor and the internal audit group, review the adequacy of the Corporation's internal control structure and procedures designed to ensure compliance with laws and regulations and any special audit steps adopted in light of material deficiencies and controls;

(i) review management's response to significant internal control recommendations of the internal audit group and the External Auditor;

(j) review (i) the internal control report prepared by management, including management's assessment of the effectiveness of the Corporation's internal control structure and procedures for financial reporting and (ii) the External Auditor's attestation, and report, on the assessment made by management; and

(k) periodically review with the internal auditor any significant difficulties, disagreements with management or scope restrictions encountered in the course of the work of the internal auditor.

11. FINANCE FUNCTION

In connection with the Corporation's finance function, the Committee shall: A - 11

(a) Review at least annually the organizational structure of the Finance function;

(b) Approve the appointment or dismissal of the Chief Financial Officer;

(c) Review and approve annually the mandate of the Chief Financial Officer; and

(d) Annually assess the effectiveness and performance of the Chief Financial Officer, and provide the results to the Chief Executive Officer as input into the compensation approval process

12. OTHER

12.1 Risk Assessment and Risk Management

The Committee shall:

(a) discuss the Corporation's major financial risk exposures and the steps management has taken to monitor and control such exposures; and

(b) satisfy itself that a crisis management plan exists that enables the company to respond quickly and appropriately to an emerging crisis.

12.2 Compensation and incentives

The Committee shall review the compensation and incentive plan for senior management to assess whether the compensation and incentive plan is influencing accounting policy choices and how changes in accounting standards influences financial metrics used in compensation and incentive plans.

12.3 Code of conduct, fraud, bribery and corruption

The Committee shall:

(a) review any factors that increase financial reporting fraud risk and how management addresses the risk;

(b) assess the risks of bribery and corruption and how management is minimizing those risks;

(c) evaluate the "tone at the top" and the company's culture, understanding their relevance to financial reporting and compliance;

(d) understand the effectiveness of the company's programs for ensuring compliance with laws and regulations, considers any significant compliance issues identified, and is satisfied with management's actions;

(e) ensure that management has an appropriate code of conduct and that management provides the code, along with related training, to employees and periodically requires employees to certify their compliance;

(f) assess whether the company's ethics and conduct policies properly address culturally or regionally sensitive issues; and

A - 12

(g) provide oversight for any investigations for possible fraud or illegal acts.

12.4 Related Party Transactions

The Committee shall review and approve all related party transactions in which the Corporation is involved or which the Corporation proposes to enter into.

12.5 Expense Accounts

The Committee Chair shall review and make recommendations with respect to:

(a) the expense account summaries submitted by the Chief Executive Officer on a quarterly basis; and

(b) the Corporation's expense account policy and rules relating to the standardization of the reporting on expense accounts.

12.6 Whistle Blowing

The Committee shall put in place procedures for:

(a) the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters; and

(b) the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable or inappropriate accounting or auditing practices or other matters that relate to the Corporation generally.

13. ANNUAL PERFORMANCE EVALUATION

On an annual basis, the Committee shall follow the process established by the Board and overseen by the Nominating and Corporate Governance Committee for assessing the performance and effectiveness of the Committee.

14. CHARTER REVIEW

The Committee shall review and assess the adequacy of this Charter annually and recommend to the Board any changes it deems appropriate.

Approved by the Board of Directors of Sleep Country Canada Holdings Inc. on February 4, 2020.

A - 13