Note I—Commitments and Contingencies

Operating Leases: We lease facilities and equipment under agreements that expire in various years through 2021. Substantially all such leases contain provisions for multiple renewal options. In addition to minimum rentals, we are required to pay certain executory costs, such as real estate taxes, insurance and common area maintenance, on most of our facility leases. We are also required to pay additional rent on certain of our facility leases if sales exceed a specified amount. The table below shows you our future minimum lease payments due under non-cancelable leases as of December 30, 2000. These minimum lease payments do not include facility leases that were accrued as merger and restructuring costs or store closure and relocation costs (See Notes B and C).

We are in the process of opening new stores and CSCs in the ordinary course of business, and leases signed subsequent to December 30, 2000 are not included in the above described commitment amounts. Rent expense, including equipment rental, was approximately $393.5 million, $321.5 million and $249.2 million in 2000, 1999 and 1998, respectively. Included in this rent expense was approximately $1.1 million, $0.8 million, and $1.1 million of contingent rent, otherwise known as percentage rent, in 2000, 1999, and 1998, respectively. Rent expense was reduced in 2000, 1999, and 1998 by sublease income of approximately $3.0 million, $3.2 million, and $4.0 million, respectively.

Guarantee of Private Label Credit Card Receivables: We have private label credit card programs that are managed by two financial services companies. We are the guarantor of all loans between our customers and the financial services companies. Our maximum exposure to off-balance sheet credit risk is represented by the outstanding balance of private label credit card receivables, less reserves held by the financial services companies which are funded by us. At December 30, 2000, this exposure totaled approximately $239.2 million.

Other: We are involved in litigation arising in the normal course of our business. In our opinion, these matters will not materially affect our financial position or results of our operations.

Note J—Employee Benefit Plans

Long-Term Equity Incentive Plan

Our Long-Term Equity Incentive Plan, which was approved effective October 1, 1997, provides for the grants of stock options and other incentive awards, including restricted stock, to our directors, officers and key employees. When we merged with Viking, their employee and director stock option plans were terminated. When outstanding options issued under Viking’s prior plans are exercised, Office Depot common stock is issued.

As of December 30, 2000, we had 55,807,052 shares of common stock reserved for issuance to directors, officers and key employees under our Long-Term Equity Incentive Plan. Under this plan, stock options must be granted at an option price that is greater than or equal to the market price of the stock on the date of the grant. If an employee owns at least 10% of our outstanding common stock, the option price must be at least 110% of the market price on the date of the grant.

Options granted under this plan and options granted in July 1998 under Viking’s prior plans become exercisable from one to five years after the date of grant, provided that the individual is continuously employed with us. The vesting periods for all other options granted under Viking’s prior plans were accelerated, and the options became exercisable, as of the date of our merger with Viking in August 1998. All options granted expire no more than ten years from the date of grant.

Under this plan, we have also issued 236,193 shares of restricted stock at no cost to the employees, 63,565 of which have been canceled. The fair market value of these awards approximated $3.0 million at the date of the grants.common stock issued under this plan is restricted, with vesting periods of up to four years from the date of grant. We recognize compensation expense over the vesting period.

We record an estimate of the tax benefit that we anticipate we will receive based on the stock options exercised. Each year, we adjust the prior year’s estimated tax benefit based on the actual stock sold during the year. In 2000, this adjustment resulted in a reduction of our estimated 1999 tax benefit and completely offset our 2000 estimated tax benefit (see Note M).

Long-Term Incentive Stock Plan

Viking had a Long-Term Incentive Stock Plan that, prior to the merger, allowed Viking’s management to award up to 2,400,000 restricted shares of common stock to key Viking employees. Under this plan, 1,845,000 shares were issued at no cost to employees, 1,200,000 of which have been canceled. Pursuant to the merger agreement, shares issued under this plan were converted to Office Depot common stock, and no additional shares may be issued under the plan. The fair market value of these restricted stock awards approximated $10.0 million at the date of the grants. Prior to the merger, the vesting period was 15 years. Because of the plan’s change in control provision, however, the employees now vest in their stock ratably over the 15-year period.compensation expense is recognized over the vesting period.