Craig and Jennifer's toasts to their successful business venture are interrupted by Barbara's unwelcome arrival. Barbara plops herself down and tells them that the contract Jordan had drawn up will put Barbara back in charge of B.R.O. (and Street Jeans) now that she is free. Barbara hugs a stony Jennifer before she flounces out. Afterwards, Craig tells Jennifer, with a crafty gleam in his eye, that they, indeed, will be doing business with Barbara.
At Fair Winds, Rosanna sits by the telephone, awaiting a call from James Stenbeck which will restore Cabot to her. Paul and Will arrive briefly, but leave for coffee so that they can talk about the Barbara/Emily/Rosanna haunting episodes. Just before Paul leaves, Rosanna delights Paul by suggesting that the two of them "raise a child," which Paul interprets as a desire to adopt a baby. As soon as Paul walks out the door, the phone rings and James asks Rosanna, "How fast can you get up the stairs?" Rosanna runs upstairs to find James holding Cabot, whom he now calls "Jimmy." Cabot holds his favorite toy, a bear, and does not remember Rosanna. James, true to form, tells Rosanna that he didn't "intend to hand Cabot over and walk off into the sunset - there's more."
Paul and Will go to the Athletic Club, where Paul tells Will that Emily believes that Rosanna set up her own haunting. When Will says, "That makes perfect sense," and adds that he thinks that Rosanna is seriously disturbed, Paul walks out. He tells Will that he will not pass on Will's comments to Rosanna because they would break her heart.
Keith comes to the police station to tell Jack that, after his encounter with Carly, he and Julia have decided that they will gradually separate J. J. from Jack. Jack calls Carly on her cell phone and finds that she is babysitting at Lily's. At Lily's house, Holden arrives and tells Carly that he actually was in an accident - in the cab he took after leaving his car at Julia's. Holden dashes out to intercept Lily, who has gone to Julia's to confront Holden about the lie she thought he told about the car accident. Carly tries to call Lily, but Lily is in a shouting match with Julia and ignores her phone. Jack arrives at Lily's and tells Carly that Keith is going to take J. J. away from him completely, "because of you." When Jack begs Carly to stay out of Julia's business, Carly admits that her spying and the discovery of Holden's car might have made 'a bad situation a thousand times worse."
At Julia's apartment, with Holden's car sitting outside, Lily demands to see Holden. Instead of telling her that she is borrowing Holden's car, Julia snidely offers to let Lily search the place, but warns her that the bathroom floor might still be wet from "our" shower. Julia continues to taunt and Lily gets angrier and angrier. Finally Julia tells Lily that Holden feels only pity for her. This pushes Lily over the edge and Lily goes for Julia's throat. Of course, Holden arrives just in time to find Lily choking Julia. Holden sadly tells Lily that he is ready for a divorce, "You have to let me go." Lily tearfully reminds Holden that their connection "won't go away." Holden reaches out to touch Lily's cheek when Julia re-enters the room. Lily turns around and screeches at Julia to die and leave them alone, shocking all three of them.
Henry is delighted when he finds out that Katie has ordered that all of his things be brought out of storage and taken to "their" house. Henry tells her that their marriage seems more and more like a "real marriage" every day. Henry talks Katie into going to Metro for happy hour to celebrate. Unbeknownst to the newlyweds, Mike, Jennifer and Craig are there discussing Barbara's insistence that she take over Streetjeans. Mike has tried to convince Jennifer that she has what it take to create a company of her own, but Craig insists that Jennifer stay with Worldwide. Jennifer is distracted when she sees that Mike has spotted Henry and Katie. Mike leaves Craig and Jennifer to say hello to them at the bar, but when he overhears them talking about her snoring, he turns away intending to return to his table. Instead, he runs into a waiter who drops his tray and Henry and Katie see him.
Rosanna cherishes the chance to hold Cabot again, but is horrified to hear that he has one more demand -- that she leave Paul to go away with him. She tells him that she simply cannot choose between them, but Rosanna is destroyed when James pulls Cabot away from her. Cabot's teddy bear falls to the floor and she picks it up just as Paul enters the room. He sees how upset she is and holds her closely, telling her that he doesn't understand how anyone could believe what Emily had said about her. But Rosanna tells Paul that Emily is telling the truth!
Things aren't going well for Lily, either. Holden walked into Julia's apartment just in time to see Lily with her hands around Julia's throat but not soon enough to hear what Julia said to egg Lily on. Holden is furious! He tries to reason with Lily, but when Julia says "maybe I should leave" Lily tells her she should die and threatens her. When Lily leaves, Julia tells Holden she was "so scared" and Holden assured her he would take care of her -- and Lily. He leaves to talk to her. Meanwhile, Carly is in trouble with her husband, too. Jack automatically blamed Carly for Keith's decision that he cannot spend time with J.J. Jack is further infuriated when he demands to know why Lily isn't home. When Carly tells him, he leaves in anger to talk to Julia in hopes of changing her mind. But Julia will have none of it. When Jack tells her he loves his son, Julia reminds him that J.J. is not his son. Julia adds insult to injury when she tells Jack that it isn't her fault, that if he wants to blame someone that he should look at the woman he "chose to sleep next to every night." Julia turns on the victim tears and Jack asks if they plan to leave Oakdale. Julia asks him if he wants them to leave and Jack says "No, I don't want you to leave." He looks confused and dejected when Julia closes the door in his face.
Holden has followed Lily home and declares that not only does he want a divorce, that he is going to seek a restraining order against Lily. She is mortified! After he leaves, Carly tries to comfort her. She assures Lily that the only thing they need to do is find out exactly what secret it is that Julia is hiding about El Paso!
James admits to Barbara his plan to destroy Paul by taking Rosanna away from him and tells Barbara he needs her help to make sure Paul doesn't follow her.
Meanwhile, forcing herself to keep Cabot in mind, Rosanna gives a heart wrenching performance and tells Paul that she never loved him and that she orchestrated the hautings to hurt him. She leaves her devastated husband and tells him she will never see him again. She goes to meet with James and is elated when she once again has Cabot in her arms. But, she is hit with the enormity of the situation when James tells her to say goodbye to Oakdale forever. Later, Barbara finds Paul a wreck and realizes Rosanna has done her work well.
Alison is won over by Celia's innocence and determination and agrees to help her stay in Oakdale, even as Rafael gets the passport from Sierra that will allow Celia to return home. When Rafael shows up at Aaron's apartment looking for Celia, Alison fails to convince Rafael to change his mind to let her stay and puts another plan into action. She sends Celia to Metro where she meets Casey as he is setting up a music system for Metro's new Karaoke night. She gets on stage and begins to sing, just as Rafael enters and sees her.
Craig is yet again rebuffed when he tries to get Jennifer to change her mind about quitting Street Jeans. Later, when he confesses the problem to Sierra, she tells him that he should do whatever is necessary to get Jennifer back. Meanwhile, Mike's discomfort about Katie and Henry's marriage continues to grow and Jennifer is all too aware. When Jennifer and Mike show up at the cottage to retrieve something Mike left behind, the discussion turns to having children when some of Henry's old children's books appear. When Mike freaks out even more, he and Jennifer leave and Jennifer tells Mike to admit that he's still in love with Katie. Meanwhile, Katie says she thinks it would be wonderful if Henry had children and Henry is left to wonder if Katie is saying she wants to have children with him.
Celia is singing at Metro. Casey walks in and is mesmerized by her voice. Rafi comes in and stops her. Alison asks what he is doing and tells Rafi that she is going to help Celia stay in Oakdale. Aaron steps in and tells Rafi that he knows what's best for Celia and Alison should mind her own business. Rafi thinks for a minute and says Celia can stay if the INS approves. Rafi and Celia go to see Sierra and Rafi asks her to help him. Sierra says she will do what she can. Rafi and Celia return to Metro so Rafi can finish his shift. Casey wants to take Celia out for a burger but Rafi nixes the idea.
Mike and Katie were talking about his black book. The conversation drifts to Mike and Katie wants to know why Henry keeps bringing Mike up. Henry skirts the issue and they talk about kids and being intimate. Katie wants to take things slowly and that they need to adjust to being married. Craig arrives and gives Katie a check as a wedding gift. They start to talk about her happiness. Katie says she is happy and that Henry is a wonderful person. Katie becomes upset because Craig keeps bringing up Mike and runs upstairs. Henry asks what Craig did to upset Katie. Craig says that Henry knows. Henry says he is right where he wants to be. Craig agrees and leaves. At the door, he says to himself that he gives it a month and Katie will be back with Mike. Then it will be straight sailing for him, Jennifer and Street Jeans. In the meantime, Mike is trying to convince Jennifer that he is in love with her and wants to marry her. He wants to start a family right away. At first, Jennifer doesn't buy it but Mike convinces her and she gives in. Later when they are about to make love, Jennifer stops him and tells him that she thinks this is all about Katie. Mike says it isn't and tells her about Nora and Sage. Jennifer listens, finally giving in and they race to the bedroom.
A private investigator shows up at Lily's and the news about Julia is all bad. They find out that Julia is wanted in Texas on a drug charge. She was supplying drugs to her ex-husband Les and there is a bench warrant out for her arrest. Carly wants to call the Texas authorities but Lily has second thoughts because she thinks if Holden finds out he would stand by Julia's side. Carly says that Holden couldn't be further away so what does she have to lose. Lily is concerned about JJ and Carly suggests they confront Julia first. Lily doesn't want to decide right away but Carly says they have to make a decision quickly. They agree to approach Julia. Over the Lakeview, Julia is trying to get Lisa to help her put on a romantic dinner for Holden. Lisa balks at the idea and walks away. Keith comes in and tells her to leave Holden alone until he is divorced. Julia won't hear any of it and they start to argue about what happened in Texas. Keith wants her to tell Holden and Julia says absolutely NOT. Their conversation becomes loud and Lisa comes over and tells them to leave.
A devastated Paul receives divorce papers in the mail just as James is revealing Rosanna's new identity to her. James tells her that the next step is up to Paul and Rosanna is horrified to realize that James plans to marry her once the divorce is final. Meanwhile, Paul, still completely in love with Rosanna, refuses to realize that his marriage is over, but Emily arrives and helps him see that he must move on. Eventually, he signs the papers, and James receives word, immediately that Paul came through. James then tells Rosanna that Cabot is waiting and as he slips a ring on her finger, it appears as if the two are about to be married.
Henry shocks Katie when he makes it clear he is ready to be a husband to Katie in every sense of the word, meaning he wants them to be together physically. After her initial surprise, Katie makes it clear she is willing to try as well. They begin to kiss and as things heat up, Katie breaks down in Henry's arms and admits she can't do this. Meanwhile, Barbara attempts to use what has happened with Paul to appeal to Jennifer's emotions and bring her back to Street Jeans but is ultimately thwarted when Mike reminds Jennifer that Barbara is probably up to her usual tricks. Barbara is shut down but when she leaves, Mike makes a subtle proposal by assuring Jennifer that her family won't always be a mess.
Alison reassures Aaron's first-night jitters and tells him that Metro's grand re-opening will be a complete success. Meanwhile, as Rafael is doing last minute chores to prepare for the opening, he catches Celia planning to attend an audition in Chicago and quickly dashes her plans. But, Casey, who has overheard, comes up with an excuse for Celia and whisks her away. Aaron arrives and all looks good until a building code officer arrives for an impromptu inspection and tells the horrified group there is no way the club is opening tonight.