The party goes to the valley where Bryk is traumatized and they are attacked by undead. They find Grallen's tomb, returning the helm and being guided to an arch that they rebuild, creating a portal. The are teleported to a new area, Derkin's Tomb, that they explore, eventually finding the hammer and a tired old dwarf who looks like Kharas and goes by Kharas and joins them.
The party enters a courtyard where they find a story about the crafting of lances. The party takes note of it when suddenly they are attacked by Ember the dragon. Kharas reveals himself to be a gold dragon but is unable to assist until Ember hurts him, causing him to attack. The party finds a flagpole shaped like a lance Alphy, Riverwind, Pernicious and Laurana all use it to attack Ember, slaying the dragon. More dragons cry in the distance, and Kharas turns back into a dwarf, giving the party little horse statues that turn into horses.
He instructs the party to take the hammer, giving it to Riverwind, as the Dragon Army - and more dragons - are approaching. The tomb starts tumbling around them as the party flees on horseback with the hammer, escaping to the hall of Justice that has been overrun by Daergar. The party leaves their horses and battles through, finding more prisoners, one of which is named Eben. The party eventually makes their way to the Temple of Stars, where they end up face to face with Verminaard and the Daergar army.