The group takes on a band of goblins and explores their hideout in a cave. On one of the goblins they find a teddy bear, which they suspect belongs to one of the mayor’s children. Pandjed, or Jed, meets up with the group to help after being released from jail and paying his fine. After avoiding some traps Indiana Jones style, they find the children and return the stolen gold to the town of Westmin. They celebrate with the town that evening, and things take a turn for the worst when someone yells out Dragon!