Don courts a Heinz executive who hints that his division might jump ship to Sterling Cooper Draper Pryce -- in six months, if the agency survives. The executive praises Don's creativity but advises him to "let the account boys" chase after new business.
At the Francis home, Sally expresses interest in dining with Betty and Henry each evening instead of with her brothers.
Faye's boss, Geoffrey Atherton, recommends that SCDP pursue Philip Morris's new women's cigarette, and says that he's arranged an exclusive pitch meeting. Lane, worried about cash flow, tells Pete that the agency should consider reducing staff and office space.
Sally meets secretly with Glen Bishop, who boasts that psychiatrists can easily be fooled. He reminds her that he, not her doctor, counseled Sally to "kiss your mom's ass."
Leaving the office, Don runs into Midge Daniels and accompanies her home. While attempting to sell him one of her paintings, Midge's husband lets slip that she tracked Don down. Alone with Don, Midge reveals that she has become a heroin addict and "just can't stop." Don buys a painting and leaves.
Sally, meanwhile, meets with Dr. Edna, who congratulates her for learning to control her temper and says that given her progress they will begin meeting only once a week.
At her monthly session with Dr. Edna, Betty argues against a decrease in Sally’s therapy, insisting her life is still chaotic. Betty rejects the suggestion that she begin psychotherapy for herself, so Dr. Edna agrees to continue seeing her.
Philip Morris cancels the pitch meeting and awards the cigarette account to rival agency Leo Burnett. "We're desperate," Don comments. "They can smell it on us."
Peggy, Harry, and Ken listen through the wall as Lane describes the line of credit their bank will extend SCDP to keep operating, contingent upon cash collateral: $100,000 each from Don, Roger, and Cooper, and $50,000 each from Lane and Pete. Drastic staff cuts will also be required. Cooper reminds Pete that his contract obligates him to contribute when Pete objects.
Back in Ossining, Sally slips away to see Glen. The two discuss their dreams and ponder death.
Pete explains to Don that Philip Morris used the threat of an SCDP meeting to negotiate a better deal from Burnett and mentions that he doesn't have $50,000. "I'm doing everything I can," says Don.
Peggy offers Don suggestions for saving the agency, reciting his own maxim: "If you don't like what they're saying about you, change the conversation."
That evening Trudy tells Pete that the bank called about his loan application. When Pete discloses the loan's purpose, Trudy forbids him to use their cash to prop up the agency.
At his apartment, Don stares at Midge's painting before commencing an entry in his journal entitled "Why I'm Quitting Tobacco," an addictive product that he says "never improves, causes illness, and makes people unhappy." Don admits that his agency made money promoting Lucky Strike, but declares that with tobacco out of his life he can now sleep at night.
Don runs the entry as a full-page ad in the New York Times, shocking his partners with the proclamation that SCDP will no longer take tobacco business. The ad closes with a list of the agencies that still do. Pete accuses Don of throwing a tantrum. His colleagues' response briefly tempers when Megan announces that Senator Robert Kennedy has called to speak with Don, but it turns out to be Ted Chaough, who thanks Don for including him "with the big boys."
Cooper resigns from the agency. Pointing at Don, he says, "We've created a monster." Privately, Megan applauds Don for the letter, acknowledging its purpose was to pretend that "he didn't dump me, I dumped him."
Don calls Peggy to his office to alert her about upcoming layoffs, afterward noting that she didn't mention his ad. "I thought you didn't go in for those kinds of shenanigans," she smiles.
Back in Ossining, Betty catches Sally with Glen, who flees. Betty says that Glen is bad, but Sally disagrees. "I know him better than you do," Betty contends.
Faye drops by Don's office to announce that Atherton is severing ties with SCDP to avoid alienating potential cigarette accounts. Don apologizes, but Faye focuses on a positive outcome: they can now date openly.
As Faye departs, Peggy says that she admires her work and ability to earn respect without having to "play any games." "Is that what it looks like?" Faye asks.
Henry dines with his family that night. Citing their neighborhood's decline, Betty proposes they move. Sally runs upstairs and cries, clutching the lanyard Glen gave her.
At a meeting to discuss layoffs, Roger informs Don that the American Cancer Society called about developing an anti-smoking campaign. "Don saved the company," Pete grumbles. "Now go get rid of half of it."
Pete notifies Lane that he doesn't have the $50,000. Don has already paid Pete's share, Lane replies. Across the hallway, Pete and Don silently acknowledge each other.
Peggy and Stan attempt to work as laid-off associates sob in the hallway. After letting Danny go, Don pauses outside his office to survey the scene. He invites the next employee inside.