As Christmas approaches, Olivia and Jack are both dealing with their break-up. Olivia is miserable in Cedar Cove, while an equally miserable Jack is in Philadelphia making plans to start his dream job. Without Olivia however, Jack is not able to enjoy the idea of the new job.
After a long day, Olivia returns home to find Stan in her kitchen making dinner. Olivia did not invite him and doesn't want him there, but when she tries to tell him to go he doesn't listen. This reminds Olivia of all the reasons their marriage broke up in the first place, and her confusion over her feelings for Stan dissipates. She tells him that she will always care for him, but they can't make a new life together. They're different people now, and nothing can bring back the past.
At the docks, a young pregnant woman named Shelly arrives in town, curious about the currently closed Cedar Cove Chronicle. She visits Moon's and asks about the newspaper, since she needs to see the want ads. Moon offers her a job at his place and, seeing that she has a guitar with her, offers to let her play there as well.
Back at the Thyme and Tide, Bob is going overboard with Christmas decorations when Shelly arrives in a taxi. Peggy is immediately curious about their new visitor, but Shelly is evasive about what she is doing in Cedar Cove.
Justine runs into Warren, who tries again to convince her that she would be better off with him than with a man like Seth who would disappear and leave her. Justine defends Seth saying that she is sure he is on a fishing boat working but has no answer when Warren asks if Seth stays in touch.
At the art gallery, Maryellen and Justine take down John's photos. Maryellen hasn't heard from him in a while and has no way to reach him or to send him money when she does make a sale. Meanwhile, Charlotte arrives at the gallery and asks for help with a piece of art from the attic of a friend who recently passed away. The piece might be by a well-respected artist, and Maryellen offers to find out of it's the real thing.
In Philadelphia, Jack settles in at his new position, hanging out with his co-workers over a club soda while the rest enjoy beers after hours. Jack feels slightly out of place as the sober one, especially when his friend receives a call from his wife and lies about having to work late.
Olivia and Grace commiserate about their love lives. Olivia is happy things are over with Stan but is now convinced that she has ruined things with Jack for good. Grace confides that she has also blown her chance with Cliff. She has tried to ask him out twice but he has turned her down both times. Olivia encourages her to try again with Cliff, just in case.
Justine is working at the art gallery when Seth suddenly appears. She is furious at him for leaving without a word, but he explains that his problem was more than just her spending time with Warren. He felt he didn't have anything to offer her, so he went to Alaska to meet an old boss and see if he could get a loan. He wanted to work out a way that he could stay in Cedar Cove with Justine and not have to leave for months on end to work. He sold his boat and with that money and the loan money he plans to open a seafood restaurant in town. He apologizes for leaving her and tells her that he wants to do this for them and for their future together. Justine can see the love in his eyes and the two share a heartfelt kiss.
Inspired by a couple that recently renewed their vows on their 60th anniversary, Olivia decides that she has had enough of her separation from Jack. She makes plans to fly to Philadelphia and tell him she loves him. Unbeknownst to her however, Jack has arrived back in Cedar Cove to tie up loose ends before he moves to Philadelphia for good. He stops by the Thyme & Tide, where Bob encourages him to think positively about Olivia. Jack can't do it though, and he drives off on his own.
Grace is in town where she sees Cliff and decides to try another way to get close to him. She tells Cliff that she wants to take riding lessons from him. Cliff is wary but sees no reason to turn down the business and the two make plans to meet up. After Cliff leaves, Grace sees Jack passing by and frantically calls Olivia, determined to reach her before she takes off for Philadelphia.
As Jack returns to the Chronicle to pack up the last of his things, Charlotte arrives. She reminds him that he has become the voice of the town through his work, but he's not interested in continuing on. She does plant the seed of an idea with himâ�¦ After seeing a man in black arrive on the docks to meet with Sheriff Davis, she's convinced the feds are in Cedar Cove for an investigation.
Seth comes to see Justine at the art gallery and tells her that his offer for the restaurant was turned down by the realtor. Unsurprisingly, Warren was behind it. A furious Justine confronts Warren, who tells her that it is all out of his hands and that he had to raise the price on the building. He insists it is not personal, so Justine gets his assurance that if they come up with the new asking price, he will sell to Seth.
In Seattle, Maryellen has discovered a few interesting tidbits about the art piece she brought down for appraisal. While on the phone, her attention is caught by a gallery window that displays a piece clearly belonging to John. Not only that, but she is featured in the photograph. Inside the gallery, she discovers that John's work isn't being officially shown; the owner bought the piece from John on a street corner. It looked like he was down on his luck. Maryellen buys the photograph on the spot and sets out to find John.Olivia goes to see Jack and tries to explain how she feels about him, but Jack is unwilling to listen and defensively points out their differences and why a relationship between them would never work. Rejected, Olivia has no choice but to leave, but not before reminding Jack that she loves him.
At the Thyme & Tide, Peggy is curious about their young guest and subtly starts to question Shelly about her plans for when the baby is born. Shelly confides that she has no family and will be giving the baby up for adoption. She asks Peggy if she knows a lawyer and Peggy sends her to Olivia for advice. Olivia goes through Shelly's choices with her and it is clear that Shelly loves her unborn daughter and only wants what's best for her.
Later, business is slow at Moon's and Shelly is about to head out when she picks up her instrument and sings for a few of the customers. Moon is impressed, as is Jack and the other customers. Jack wants to know more about Shelly, but Moon isn't one to pry into another person's baggage.
As Jack takes a last stroll through Cedar Cove, Grace chases him down and lays into him about leaving Olivia. She tells him that it is obvious that they are in love with each other and warns him against making a mistake by leaving for good. Later, Grace makes good on her promise to Cliff about taking riding lessons, and she makes a little progress (but not much). Dismounting her horse, her foot gets caught in the stirrup and Cliff catches her. The spark is still alive between them.
The mysterious man in the dark suit is parked near Warren's office, and Warren is uncharacteristically nervous when Justine and Seth come in with the extra money to buy the restaurant. They are ready for him to come up with some new excuse to turn them down, but are surprised when he not only agrees to the sale, but offers them the keys so they can get to work while escrow goes through. Together, they start fixing up the place, but are interrupted by the mysterious visitor, who wants to talk to Justine.
Peggy is bringing towels to Shelly's room when she notices a journal with a strip of photo booth pictures peeking out of it. Unable to contain her curiosity, Peggy takes a look and realizes that these are photos of Shelly with the baby's father. Stunned by the father's identity, she takes a picture of the photos and shows it to Olivia. The man in the photos is Jack's son, Eric.