LIONEL SETTLES K-LINE LAWSUIT

CHESTERFIELD, MI -- October 27, 2005 -- Lionel LLC announced today that it has settled the trade secrets law suit it first brought against K-Line Model Trains more than two months ago. In that suit, Lionel claimed that K-Line had paid Lionel's chief engineer to design speed control, sound and transformer systems for use in K-Line’s products, and that those K-Line products contained Lionel’s proprietary technology.

Under the terms of the settlement, K-Line, which filed for bankruptcy protection during the proceedings, agreed to the entry of a permanent injunction that will prohibit them from manufacturing or selling any products that allegedly contained Lionel's technology. They also agreed to renounce any claim to the technology in question, and to give Lionel a $2 million damage claim in its bankruptcy case. Finally, in order to avoid future litigation, K-Line granted Lionel a royalty free license for other, selected patents.

Inventoried supplies of K-Line products containing the Lionel speed control, sound and transformer technology cannot be sold or shipped by K-Line unless the Lionel technology is removed.

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