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Jacob Singer (Tim Robbins) is a U.S. soldier deployed in the Mekong Delta during the Vietnam War. When the story begins, in 1971, helicopters are passing overhead, carrying supplies for what seems to be preparations for a Viet Cong offensive. Without any warning, Jacob's unit comes under heavy fire. The soldiers try to take cover but begin to exhibit strange behavior for no apparent reason. Jacob attempts to escape the unexplained insanity, only to be stabbed with a bayonet by an unseen attacker.

The film then shifts back and forth from Vietnam to Jacob's memories (and hallucinations) of his son Gabe (Macaulay Culkin) and former wife Sarah (Patricia Kalember), and to his present (set in 1975) relationship with a woman named Jezebel (Elizabeth Peña) while working as a mailman in Brooklyn, New York City. During this latter period, Jacob faces several threats to his life and experiences grotesque hallucinations. It is also revealed that his son Gabe was hit by a car and killed before Jacob went to Vietnam.

At a key moment, Jacob's friend and chiropractor, Louis (Danny Aiello), cites the 14th century Christian mystic Meister Eckhart: Eckhart saw Hell too. He said: "The only thing that burns in Hell is the part of you that won't let go of life, your memories, your attachments. They burn them all away. But they're not punishing you," he said. "They're freeing your soul. So, if you're frightened of dying and... you're holding on, you'll see devils tearing your life away. But if you've made your peace, then the devils are really angels, freeing you from the earth."As the hallucinations become increasingly bizarre, one of his old army buddies contacts Jacob to tell him about his hallucinations and is later killed when his car explodes. At the funeral, his surviving platoon-mates confess to Jacob they too have been seeing horrible hallucinations.

Jacob is then approached by a man named Michael Newman (Matt Craven), who claims to have been a chemist working with the Army's chemical warfare division in Saigon, where he worked on creating a drug that would increase aggression. The drug was code named "The Ladder" because it took people straight to their most primal urges. The drug was first tested on monkeys and then on a group of enemy POWs, with gruesome results. Later, small doses of "The Ladder" were secretly given to Jacob's battalion via their C-rations. Instead of targeting the enemy, however, the men in Jacob's unit attacked each other indiscriminately. This revelation insinuates that Jacob was stabbed by one of his fellow soldiers.

The last scenes of the movie have Jacob returning to the apartment building he once lived in with Sarah. He enters and begins looking through an old shoe box, containing his memories and the pain he’s been clinging to, things like his dog tags and a picture of Gabe. Jacob then is surprised to see Gabe at the foot of the stairwell. Gabe takes Jacob by the hand and together the two of them ascend the stairwell and disappear into a bright light.

At the dénouement, we learn Jacob never made it out of Vietnam; his body is shown in an army triage tent with two surgeons just after he expired, with a now peaceful look on his face. Apparently, the entire series of events was his dying hallucination. Before the film credits, an on-screen title card states that reports of BZ testing by the U.S. Army on its soldiers during the Vietnam War were denied by the Pentagon.

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