Chapter 1 - Markovna - Gallowsbog
Chapter 2 - Lost Place
After getting quest to find the Essense of Electricity(Gallowsbog) from blacksmith(in Markovna), talk to him again and accept his offer to learn forging for 100 Gold.
Keep the blade, go to church and talk to Nutty Stefan - select dialog option with "bunnyslayer"
In Chapter 2 in Lost Place find and kill a White Rabbit (surrounded by 3 dead werewolfs) with your "Bunnyslayer".
You have to deal a killing blow, so it's a good idea to set Katarina to ghost mode.