The group arose in the morning and set out for the kobold lair according to the map drawn for them by Ernest Padraig. Shortly after leaving Winterhaven, they were set upon by another band of kobolds. They vanquished the monsters, but Oglar Tanner fell in battle. After discovering an obsidian statue of a dragonlike figure with a demon head carved in the bottom, they returned to town to allow Oglar to heal from his wounds.
The party purchased some healing potions in town after selling the statue, and also bought a very rare flower known as a blood lily that grows only in the shadow of the great keep in the mountains.
The adventurers set out again the next day and came upon the waterfall behind which the kobolds roosted. Milling about the waterfall were several kobolds and the party engaged them in combat. They emerged victorious, but Orrik Blackhat was slain.
Before they could stop him, one of the kobolds ran back into the waterfall lair shouting "Irontooth must be warned!"