Highlighting the risks from harmful materials in products, the toy maker has settled a lawsuit brought by 39 states after some of Mattel's toys were found to contain dangerous levels of lead. Mattel will make the $12 million payment by January 30, 2009, and it will be divided among all 39 states.

The toy recall affected about 2 million toys between August 2 and October 25, 2007; the toys carried Mattell and Fisher-Price brand names and were manufactured by contractors in China. The toys tested at the time showed levels of lead far in excess of the 600 parts-per-million laid out by the federal government: some toys contained lead as high at 50,000 ppm.

In addition to paying out the agreed amount, the settlement requires that Mattel follow more stringent standards for the use of lead in toys beginning November 30, 2008, as well as maintaining records for four years regarding any subcontractors that manufacture parts of any of its toys.

Yesterday's settlement comes on the heels of another report that found more than one-third of toys tested contained toxic levels of lead, mercury, cadmium or other harmful materials. That report, by the Michigan-based Ecology Center, tested 1,500 toys that are currently on shelves as phase two of its project to build a toxic-toy database at HealthyToys.org.

Earlier this year, a report surfaced showing that some previously deadly toys had resurfaced with new, healthier formulations and new names.