As the party returned to the ancient Elvish path, Redd noticed the tracks of several men leading away towards the direction they were heading. Elorian and Nîth scouted ahead and saw three men carrying a rather large sack (in which something was kicking jostling about). They immediately recognized the men as the three thugs who had assaulted Baldor in Laketown.
Elorian gave away his and Nîth‘s position and opened fire on the thugs. The rest of the party heard the scuffle and moved forward to help take them down. They’d obviously been following the group and reasoning with them was deemed counterintuitive. The criminals were dealt with swiftly and a Hobbit burst out of the sack they had been carrying.
The Hobbit turned out to be Leneth who had been captured by the Lakemen.
Shortly thereafter, thunder and lightning began to crash overhead — rain beginning to flow copiously along the forest floor. Further travel would have been impossible so the party started searching for a dry place within sight of the path to wait out the storm. Searching did not go well and the party was driven a ways from the path where they discovered an unusual sight: a huge dead tree with a plume of woodsmoke rising from the top.
Leneth found a tunnel at the base of the tree that wound between its roots into the tree’s interior. There was no one to be found inside but a cooking fire had been left unattended. Searching around inside, Redd noticed that the walls were covered in woodcarvings depicting monsters of all sorts. Whoever inhabits this tree is tormented by their dreams.
The party smelled the Hermit before they saw him as he smelled quite foul. A rail-thin man clambered up the tunnel covered in filthy rags and shrieked as he leveled his spear at the group, “WHO ARE YOU? WHY ARE YOU HERE?”
The party was able to calm the Hermit and he told them what he remembered of his story; he had been imprisoned in Dol Goldur and one day found that his jailers had abandoned him. He’s been living in Mirkwood ever since and does not remember much, let alone his name. The Hermit gifted Redd an axe head covered with elaborate etchings. The axe is Wolfbiter, a famous Woodmen axe that had once belonged to a Chieftan’s son.
The Hermit fell asleep not long after and the party settled down for the night. Redd carved something nice for the Hermit to comfort him in this place of nightmares. During the night the Hermit began transforming into a wolf and the party fled his tree in haste.