At a Christmas-tree lot with her family, Sally sees Glen Bishop. "My mom said that would happen," he says of Don and Betty's divorce.
In Don's office, Allison becomes emotional as she reads him a letter from Sally, who regrets that her father can't be with her on Christmas morning. Don hands Allison money to buy his kids presents. Lane has scaled back the office Christmas party, Don informs her, but he'll make sure she gets a bonus.
Freddy Rumsen visits Roger and offers the agency Pond's Cold Cream, worth $2 million, in return for a job. Freddy, clean and sober for sixteen months, alludes to being in a "fraternity" with the client. Freddy requests that Pete (who got him fired from the old Sterling Cooper) not handle the account.
Freddy's homecoming delights Peggy. Pete gingerly begins to pose a question, presumably about Freddy's drinking problem, but Roger interjects, "We all want to know if you can be Santa at the Christmas party."
Glen calls Sally. She hates her home, Sally tells him. "Every time I go around a corner, I keep thinking I'll see my dad." Glen predicts that her mom and dad won't get back together, but that soon Betty and Henry will decide to move.
A consumer-research company pitches its services to the agency. The company's female representative, Dr. Faye Miller, asks senior staffers to complete a questionnaire that contains entries like, "How do you feel about your father?" Don abruptly excuses himself.
Noise outside Don's apartment awakens him the next morning. "Don't pretend that you've never noticed me," flirts the perpetrator, a nurse named Phoebe who lives in his building and is hanging decorations for her Christmas party.
Freddy and Peggy argue about his Pond's concept, which is built around Broadway veteran Tallulah Bankhead. Young women don't respond to beauty tips from older women, says Peggy. This is what the client wants, argues Freddy. They have to deliver it. The agency's creative reputation is also important, Peggy responds.
Roger interrupts the discussion, drunk from a wild lunch with Freddy's Pond's contact. Freddy immediately calls his friend and arranges to meet him at a church. "Can't put two and two together?" he asks Peggy as he heads off.
Lee Garner Jr. of Lucky Strike calls Roger. Their conversation ends with Roger inviting Lee to the office Christmas party. Disregarding Lane's financial misgivings, Roger instructs Joan to change the party's rating "from convalescent home to Roman orgy."
Mark visits Peggy's apartment. "I want to be your first," he says, calling her "old-fashioned" for wanting to delay having sex. The Swedes, he's read, "make love the minute they feel attracted." Peggy asks him to leave.
Phoebe is tidying up after her party when Don arrives home, drunk. "I hate this Christmas," he mumbles. Don paws her lethargically as she puts him to bed.
The next morning, Freddy misinterprets a Pond's concept Peggy proposes, thinking it's about women desperate to marry. "Sorry if I hit a nerve there," he says. "Everybody is right about you," she blurts out. "You're old-fashioned."
"Man your battle stations!" shouts Joan as Lee Garner Jr. arrives at the office. "We have gifts, girls, and games," she tells him.
In Ossining, meanwhile, Glen and a young accomplice trash Sally's house, dumping food all over the kitchen.
Back at the party, Lee demands that Roger don Santa's suit. Roger resists at first, but then acquiesces. When Roger reappears, Lee jokes about Santa's big bag. "Don't want you to have a third heart attack," he laughs, putting his arm around Jane.
Betty, Henry, and the kids arrive home to a complete mess. Sally's room, though, is spared. On her pillow is a lanyard like one Glen showed her at the tree lot.
Faye confronts Don in his office about fleeing her presentation. He says he doesn't see how learning about his childhood will help him sell floor wax. "I saw that ad," she replies. "It's all about somebody's childhood." Their jobs both involve helping people sort out conflicts, she continues. "What I want versus what's expected of me." "That's true," Don agrees. "You'll be married again in a year," Faye predicts. "What?" he asks. "I always forget," she says, "nobody wants to think they're a type."
Don returns to his apartment drunk and without his keys. He calls Allison, who finds and delivers them. The two end up having sex. "My goodness," giggles Allison afterward.
At work the next day, Peggy and Freddy apologize to each other. Peggy admits that she does want to marry. If so, Freddy advises, she shouldn't have sex beforehand. Her boyfriend won't respect her. But she shouldn't lead him on either. "That is physically very uncomfortable," says Freddy.
"Did you enjoy the Führer's birthday?" Don asks Roger on the way to his office. "May he live for a thousand years," laughs Roger.
Allison is all smiles, too. In Don's office are his children's presents, all wrapped. "That was quite a party," says Don. "I've probably taken advantage of your kindness on too many occasions." "Excuse me?" she says. "I just wanted to say thank you for bringing my keys," he replies stiffly. Don hands Allison an envelope. "Here's the bonus we talked about," he says.
Back at her desk, Allison opens the envelope. The card within contains two 50-dollar bills. "Thanks for all your hard work," reads the note. Allison somberly places the card in her desk drawer.
Peggy and Mark lie in bed. "Do you feel different?" he asks, kissing her. Peggy rests her head on his chest.
Don leaves his office late that evening, briefcase in one hand, the presents for his children in the other.