Our heroes tracked Chip and his captors to their bandit camp north of the Fey Forest. It was revealed that the leader was the father of the bandits the party had hung from a tree in Episode 1. After a long, tactical battle, the party was victorious. However, not before Chip's death. Chip burst up in a ball of flame, emerging as a pyromancer sorcerer whose latent arcane abilities surfaced during under the duress of the battle. 

Onward to Vinhiem!