After you find a way out of the cave in chapter 3, you will find yourself in the town sqaure. At this point you will encounter many monsters. You will have to kill at least 255 or more. After that you will come across two giant snake like monsters who are reletively easy providing that you have the two swords equiped. After you defeat them both you will obtain the rusted sword. Take it to the swordsmith just before the raven forest. He will mend it for you and then you can cause some serious damage on anybody because it is the sharpest blade in the game and you will also learn a hidden technique when you equip it which can deal very heavy damage against anybody including the bosses all throughout the game.
