First... Sludge?

Speak with Herbert in front of the Barracks to begin the battle.

Reward

Battle Potions I appears on the technology tree
Healing Potion ×2

Comes after

Swords and Bell — Prepare for the next battle: get enough by building barricades and hiring mercenaries. When you're ready, speak to Herbert in the Barracks.
Swords and Bell — Make a magic bell, and bring it to Herbert in the Barracks.

Leads to

First... Sludge? — Win my first battle against the zombies.