Karen and Jim had their first big fight in the relationship. Karen had been living in a hotel since taking her job in Scranton. When she decided to live next door to Jim, he took it as the next step to living together and that was too fast. She was not pleased with his response.

Michael was in crisis mode at Dunder-Mifflin when a disgruntled employee at the paper mill put an obscene watermark on one of their most popular orders of paper. Michael called the staff into a meeting and pointed the blame on Creed, who was responsible for quality assurance at the paper mill and blew it off.

Pam is sporting a new look at work with her glasses. She admits she spent the night at a "friend's" house and forgot her contact solution. Michael makes sure to point out that the glasses make her look ugly, and if she wants to be hot, the glasses need to come off.

Phyllis' Moroccan-themed holiday party goes up in flames when Meredith's hair catches on fire and Michael is forced to deal with the accident. Meanwhile, Dwight corners the market on the hottest toy of the Christmas season.

Tension and disillusionment begin to emerge as Michael, Pam, and Ryan move the Michael Scott Paper Company into a cramped "workspace" at the business park.

Michael speaks out of line at the Dunder Mifflin shareholders meeting and creates a big problem for management, while Jim discovers that nobody in the office thinks he's the "real" boss.

Pam and Jim work on their first sales pitch together to Donna, the manager of a local restaurant. But Michael keeps misreading the signals she's putting out. Meanwhile, Dwight encourages Kelly to try out for the minority training program.

When Darryl takes an idea to corporate over his head, Michael freaks out. Everyone in the office is in a competitive mood as the Halloween costume contest gets underway. Meanwhile, Pam tries to get the truth out of Danny about their dating history.

Dwight takes charge of the office and immediately imposes his will on the staff. Gabe hopes to get back together with Erin.

The entire warehouse staff quits after winning the lotto, leaving Andy and Darryl to scramble for replacements while several of the office workers get a taste of the warehouse life.

Andy plants the seeds of trying to impress Robert California by throwing a garden party at Schrute Farms. Andy's parents and brother also attend the event, only to make him feel awkward.

Andy returns to the office to find Nellie in the manager's chair. Meanwhile, Kelly struggles to choose between Ryan and a new man.