EXHIBIT 10.6
                                                                    ------------

                          MEMORANDUM OF UNDERSTANDING
                          ---------------------------

     This Memorandum sets forth the terms of a binding agreement between and
among Chattem, Inc. ("Chattem"), Kemper Indemnity Insurance Company ("Kemper"),
Ken Randall America, Inc. ("KRA"), and Berkshire Hathaway Inc. ("BHP"):

1.   Kemper will pay up to $37,500,000.00 (the "Settlement Amount") toward
     settlement of claims against Chattem by unrelated third-parties alleging
     injury arising from ingestion of Chattem's Dexatrim products.

2.   Kemper will begin paying the Settlement Amount after Chattem or its
     insurance carriers underlying Kemper have paid the full underlying
     insurance limits to settle these Dexatrim ingestion injury claims. The
     Settlement Amount will be paid upon proof of this payment and presentation
     of Chattem-approved Dexatrim claims to Kemper. Chattem shall have the
     exclusive right to approve such claims. The Settlement Amount will be used
     solely to find settlement of Dexatrim ingestion injury claims. Kemper will
     pay the claims within fourteen (14) business days from presentation of the
     claims.

3.   If, however, establishment of a settlement account is ordered by the Court
     in the underlying multidistrict litigation, Kemper will fund the account to
     the extent any portion of the Settlement Amount remains unpaid and is
     required for funding the account. Kemper must pay the Settlement Amount
     when the full underlying insurance limits ($27,000,000) have been paid.
     This will consist of a) $3,615,000 in previously settled claims; and b)
     $23,385,000 in remaining limits, which will have been paid by Chattem or
     its underlying insurance carriers into the Court-ordered account before
     Kemper pays the Settlement Amount. If Kemper pays the Settlement Amount or
     any portion thereof into a Court-ordered account, Chattem agrees to refund
     to Kemper the interest earned on such
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     funds from the day Kemper funds the account until the day the funds are
     disbursed from the account, provided that such interest is refunded to
     Chattem from the account. Chattem will pay this interest amount to Kemper
     within fourteen (14) business days after the disbursement of any interest
     funds from the account.

4.   As a possible alternative to the settlement funding alternatives set forth
     in paragraphs 2 and 3, Kemper and Chattem may agree on Kemper paying the
     net present value of the full Settlement Amount to Chattem in a single
     payment. The net present value amount would have to be agreed upon in
     further negotiation.

5.   In no event will Kemper be required to pay any amount greater than the
     Settlement Amount, and Chattem agrees to reimburse Kemper for any portion
     of the Settlement Amount or net present value figure that is not used to
     fund settlement of Dexatrim claims against Chattem.

6.   Chattem covenants not to sue for, and fully releases Kemper from, all
     claims that directly or indirectly relate to Kemper Commercial Excess
     Liability Policy no. 9YR 001001-01 (the "Policy"), including but not
     limited to the claims of Chattem for reimbursement under the Policy or for
     a defense under the Policy, or that are related in any way to the handling
     of Chattem's claim for coverage, or that are related in any way to
     litigation brought against Chattem by Kemper. Chattem makes the release on
     behalf of itself, its affiliates, successors, assigns, agents, officers,
     employees, and all persons or entities insured under the Policy, and the
     release applies to Kemper and its affiliates, successors, assigns, agents,
     officers, employees, insurers and reinsurers. For the purposes of this
     paragraph, BHI and KRA are not affiliates, successor, assigns, agents,
     officers, employees, insurers, or reinsurers of Kemper.

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<PAGE>

7.   Upon payment of the Settlement Amount, Chattem covenants not to sue for,
     and fully releases BHI and KRA from, all claims, including but not limited
     to those that directly or indirectly relate to the Policy, or the handling
     of Chattem's claim for coverage, or litigation brought against Chattem by
     Kemper. Chattem makes the release on behalf of itself, its affiliates,
     successors, assigns, agents, officers, employees, and all persons or
     entities insured under the Policy, and the release applies to BHI and KRA
     and their respective affiliates, successors, assigns, agents, officers,
     employees, insurers, and reinsurers. This paragraph is void should Chattem
     be required to return the Settlement Amount (or any portion of it) to
     Kemper, or Kemper's receiver, liquidator or the like. The Settlement Amount
     does not include the interest that may be paid by Chattem to Kemper.

8.   Kemper agrees to dismiss with prejudice its claims in the lawsuit captioned
     Kemper Indemnity Ins. Co. v. Chattem, Inc., et al., Docket No. 1:03-CV-264
     (E.D. Tenn.) (the "Lawsuit"). Chattem likewise agrees to dismiss with
     prejudice its claims in the Lawsuit against Kemper. These dismissals will
     be filed by a joint instrument within five (5) days after the execution of
     this agreement.

9.   Chattem agrees to dismiss without prejudice its claims in the Lawsuit
     against BHI, KRA and all Doe parties. These dismissals will be filed
     contemporaneously with the joint instrument referenced in paragraph 8
     above. Upon payment of the Settlement Amount in full, Chattem agrees to
     dismiss with prejudice its claims in the Lawsuit against BHI, KRA and all
     Doe parties. If the Settlement Amount is not paid and Chattem institutes
     suit against BHI and KRA, BHI and KRA agree not to plead as a defense to
     such action laches, waiver, estoppel, lapse of time, any statute of
     limitations, any statute of repose, or

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<PAGE>

     any similar defense based on the failure to bring such action on or after
     August 21, 2003. The agreement not to assert defenses under this Agreement
     shall apply only to the extent such defenses are based on the passage of
     time from August 21, 2003 through the date the Settlement Amount is not
     paid. This paragraph is void should Chattem be required to return the
     Settlement Amount (or any portion of it) to Kemper, or Kemper's receiver,
     liquidator or the like. The Settlement Amount does not include the interest
     that may be paid by Chattem to Kemper.

10.  Notwithstanding any other provision herein, by executing this Memorandum
     and any later final written settlement agreement, BHI and KRA do not admit
     but instead deny the validity, merit, actionability, justiciability, or any
     legal or factual basis whatever of any action that has been or may be
     brought against them, and specifically reserve and do not waive any
     defenses they have asserted or may assert, other than those encompassed by
     the tolling provision above, including but not limited to lack of subject
     matter jurisdiction, lack of personal jurisdiction, failure to state a
     claim upon which relief may be granted, and other legal defenses, all of
     which are not waived.

11.  Kemper covenants not to sue Chattem's insurers or any other entity to
     recover the Settlement Amount or any portion thereof.

12.  The parties will promptly reach a mutually acceptable final written
     agreement embodying the terms herein and other terms acceptable to the
     parties.

13.  Those executing this Memorandum have the authority to do so on behalf of
     the parties identified below with said executors, and the various parties
     enter into this Memorandum of Understanding on the express representation
     of each other party that the executors of this instrument have the
     authority set forth herein.

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<PAGE>

14.  This agreement will be considered executed upon the signature of the last
     signer below; it may be executed by separate copies; each counterpart or
     copy is valid; a copy is as valid as an original; and all signed copies
     will be exchanged by fax immediately between the executors below.



                                             BATES & CAREY
DATED: 12/18/03                              /s/ Richard H. Nicolaides, Jr.
                                             ------------------------------
                                             Richard H. Nicolaides, Jr., Esq.
                                             Suite 900
                                             333 West Wacker Drive
                                             Chicago, IL 60606
                                             ATTORNEYS FOR KEMPER INDEMNITY
                                             INSURANCE CO. AND KEN RANDALL
                                             AMERICA, INC.



                                             SPEARS, MOORE, REBMAN &
                                             WILLIAMS
DATED: 12/19/03                              /s/ Arthur Brock
                                             ------------------------------
                                             Arthur Brock
                                             801 Broad Street
                                             6th Floor
                                             Chattanooga, TN 37402

                                             ATTORNEYS FOR BERKSHIRE
                                             HATHAWAY INC.


                                             McCARTER & ENGLISH, LLP
DATED: 12/18/03                              /s/ J. Wylie Donald
                                             ------------------------------
                                             J. Wylie Donald, Esq.
                                             Four Gateway Center
                                             100 Mulberry Street
                                             Newark, New Jersey 07102
                                             ATTORNEYS FOR CHATTEM, INC.

                                             NWK2: 1118177.06



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