You'll be outside the factory, head on and fight a large variety of Mad Gears. Throw the guys who can block into the Js who appear.
Once you can move on you'll have to deal with several more Mad Gears. Defeat them and you'll move on and stop before an elevator shaft. Suddenly Andore will charge into you, and knock you down it! You'll land on the elevator, where a couple of Mad Gears are waiting for you.
The elevator will start to move down. Once you defeat the first two Mad Gears, more will drop down -don't get caught under them as they can hurt you as they fall. You can throw the Mad Gears off either side of the elevator if you want to defeat them quickly, but bear in mind that you won't get as much EXP as you would defeating them normally. You also need to be careful of not getting knocked off the elevator yourself, as you'll lose one life every time it happens.
Once you're off the elevator, you'll be in a bar. You'll find some meat, so pick it up, then move on to fight more Mad Gears. Once they've been beaten, head right to find Katana's brother. He'll offer you some water, and it's safe to drink -if you take it, your life bar will be refilled.
The fight will then begin. Katana fights just like his brother, so watch out for his attempts to slice you up. If he backs off, he's going to use his charge attack, so get out of the way and then get a combo or throw in on him. But once he's taken enough damage, his swords will break.
He will go into a stance, and then uses a new attack: an afterimage dash attack. He'll charge very quickly over to where you are, usually in a straight line, or he can move diagonally depending on where you're standing. Avoid getting hit by this technique, and throw him before he can do it again. Keep repeating this until he's defeated.