Karen is overjoyed to find that Jeff is alive, until he locks her in the station and tries to kill her. He says Wayne was killed in his apartment, and he sent her all the letters. Dianne is there and calls the police. Jeff lies to the police, but Dianne taped the whole thing. Gary calls a frantic Val, and says the airbag saved him, but he kept passing out from the booze. He later talks to Karen, and Karen gives her famous ""Pollyanna"" speech. Paige makes up with Tom and moves in with him. Anne receives compromising photos of herself and a note demanding a million dollars. Danny is found dead and police say his fingers were broken, so they'll have to investigate. The coroner tells Val she's responsible for Danny's body and she's being charged rent until she has his body moved.

The police soon realize that everyone had a motive for killing Danny, but Frank is the only one without an alibi. Karen is depressed over her attack and is afraid to leave the house. Val and Gary ask Mac and Karen to be in their wedding. Paige doesn't go to work and tries to get a new job, but isn't offered any. Linda uses Paige's absence to try to ingratiate herself to Greg. Linda's upset when she hears Greg call Paige and offer her a big promotion and raise. Kate and Greg have a nice talk, and she tells him he and Claudia are exactly alike. Anne calls her ex-lover, Marco Conti, who is rich and married, and tells him they're being blackmailed. It's actually Anne who's doing the blackmailing. Marco says he'll take care of it, and sends Nick Schillace to Knots Landing.

Nick suspects Anne of the blackmailing, and says that he is going to stay with her and go wherever she goes. Anne's upset that Marco only sent $20,000 for the blackmailer. Paige is angry that everyone at the office thinks she got the promotion for sleeping with Greg. She asks Greg why he treats her like dirt. He asks Paige to marry him, but she walks out. Greg is really starting to get sick. Karen goes back to work. Diane says Karen is an egomaniac, and that she got a new job and can't wait to leave. Police find a button by the pool where Danny was killed. Ginny decides to leave. Gary tells Val that his dreams have all come true and that he can't wait to marry her. They go on a family picnic, and the twins run to Gary yelling that something has happened to Val.

Greg gets really sick and Carlos tries to call Paige. Tom and Paige fight about her working for Greg, and she leaves. Nick makes her sleep on the sofa. Tom goes to see her at the office and tells her she's a brat and a bitch. He sees Greg and punches him. Julie has skipped school since the day Danny died, and the police think she saw something. Anne tells Nick the blackmailers called. They're to drop the money at a department store. Anne drops alarm tags into a lot of shopping bags, so all the alarms go off. Anne grabs the money and runs. Nick apologizes to Anne for suspecting her and is worried about what Marcos will do to him for losing the money. Val fell on her head, but insists she is okay. She starts acting strangely, but Gary thinks it is pre-wedding jitters.

Paige tells Mac she never loved Tom the way she loves Greg. Anne and Nick sleep together. She tells Nick that the blackmailers have called for the rest of the money and she's to meet them alone. Nick switches the briefcase with money to one with a bomb in it. Michael gives Linda an engagement ring. Julie tells the police that Danny showed up drunk when she was swimming. He slapped her and said he was going to have her arrested for trying to shoot him. Julie said she ran to the house with Danny following, and his fingers were broken as she tried to shut the sliding glass door. In pain, he staggered around and fell into the pool and drowned. The police rule Danny's death an accident. Val freaks out when Gary sees her trying on her wedding dress, and accuses him of lying to her when she shows up for the rehearsal dinner on the wrong night. She calls off the wedding.