Having defeated the cultists under Bairwin's Grand Shoppe, including Bairwin himself, and having found and killed Ragash's murderer, the heroes decide to search the underground temple and the shop upstairs. Within the temple proper they find a prayer book full of prayers to Orcus. In one of the side rooms they find some food and weapon stores, while in the other there is a pile of bodies in various states of decomposition; they determine that these are likely travellers, and are also likely raw materials for creating undead servitors. Not much of use is found in the shop upstairs, with one notable exception. Sredni finds a glaive, made in the style of ancient Bael Turath and etched with flame motifs. Upon studying it, he determines that it has magical properties linked to fire.
The heroes go back to Wrafton's Inn and rest, recouperating from the previous day's fighting and investigation. Upon waking, they find that Lord Padraig, the Lord Mayor of Winterhaven, is waiting for them with a proposition: if they will stop the kobolds and goblins from attacking travellers around the town, then they will be paid a sum of 100 gold pieces. The heroes accept. Hoping to learn specifics of the whereabouts of the kobold lair, they pay a visit to their kobold prisoner, captured when they were ambushed the previous day. They use a combination of coercion and honeyed words to win the kobold's trust, and it marks their map with the location of its tribe's lair. The kobold also tells them that there are likely many kobolds there, along with Irontooth, the goblin who has taken over leadership of the tribe. They learn that Irontooth, in turn, takes orders from someone else, and that these orders are often delivered by humans or hobgoblins who visit the lair. It also becomes clear that the kobold is unhappy with the fact that his tribe has been conscripted by the goblin and his masters.
Prepared, the heroes set out for the kobold lair. An hour or so into their travels, however, another group of kobolds jumps out and takes them by surprise. A pair of well-armed and -armored kobolds immediately attacks Chance, while a lightly armored and fast-moving kobold uses hit-and-run tactics to attack Sredni and Shava. The fourth kobold, a priest or mage of some kind, hurls balls of acid at the party, and at one point even breaths a gout of acid all over Shava, Sredni, and Kraygin. The battle is difficult, but the skirmisher and the mage both fall soon, followed by one of the kobold soldiers. The other soldier tries to flee, but Chance reacts with lightning speed and catches it. The heroes interrogate the unfortunate creature, and it verifies everything that the prisoner back in town had told them, though it seems much less willing to cooperate. Deciding that they cannot simply let it go for fear that it might outdistance them and warn its tribe of their approach, and that they cannot bring it with them because it might give them away, Kraygin stays behind with the kobold while the rest of the group continues on. Once Kraygin silences the creature, he catches up with the group and they continue on to the kobold lair.