PROJECT MIDWAY

FOLLOW UP QUESTIONS
PROCESS
What's BofA's timetable for the entire process - bid submission, acceptance, due diligence, closing?
What parts, if any, of the balance sheet does BofA expect will be delivered at closing?
What elements do we need to address in our offer?
What opportunities will be afforded to gather additional information prior to submitting an offer?
STRATEGIC
Does BofA expect to maintain and develop existing producer/banker relationships?
How are the bank employees compensated and what incentives are in place to refer business?
BofA launched a new sales management system in September, 2006. How much new business was developed from banking
relationships, and how much from other sources?
Why is BofA selling the Company after hiring 45 new employees in 2006?
How much revenue have the 45 new employees generated for LTM 3/31/07?
How much revenue and how much annualized compensation is associated with the 45 new employees in the 2007 budget/projection?
Are any of the 45 new hires former Marsh employees?
Page 3 of the Information Memorandum ("IM") noted financial results exclude one-time legal and comp in 2006. How much was the adjustment,
and what was the nature of the costs?
Occupancy: Most of the locations are bank-owned. Are there discrete leases for each bank-owned property? Are there
allocated expenses? Are the brokerage employees segregated from bank employees in separate office space? Will BofA
negotiate new leases with costs consistent with historical expense?
Based on square footage per employee, there appears to be excess physical capacity in the following locations:
Melville
lease
Horsham
lease
Morristown
lease
NY Penn Plaza
lease
NY 6th Ave
Bank owned
Stamford
Bank owned
Can BofA provide an indication as to how many employees could be housed in each location?
What are the terms of the sublease at the NY Penn Plaza location?
Horizon Healthcare accounts for 30% of benefits revenues. Two Horizon companies carry A.M. Best ratings of B+ and B++.
Can BofA confirm which companies are writing this business and their Best rating?
Similarly, AmeriHealth and Keystone represent material portions of Philadelphia Benefits' revenues (32% and 25%, respectively). Both
have companies with B and B++ ratings. Can BofA confirm the ratings and discuss their view of carrier stability?
What are the total revenues, expenses and EBITDA for Philadelphia Benefits?
How much revenues are attributed to the Private Equity Practice Group?

PROJECT MIDWAY
FOLLOW UP QUESTIONS
Page 18 of the IM says producers are paid "40% of premiumfirst year, 20%...second year and 10% per year thereafter."
Is it 40% of PREMIUM, or Commission?
Is the Company's leading client ($2,108k of LTM revs) Bank of America, or BofA-related? If so, will they contractually agree
to continue to place insurance through the Company post-transaction? Ditto any other BofA-owned or related accounts?
Can we get the tenure (in years) of the top 20 clients?
Page 19 shows $11 million of new business in 2006. Yet, core commissions declined by $4.8 million between 2005 and 2006.
Did BofA lose approximately $16 million between 2005 and 2006? Why the decline in revenues?
How much "new" business in 2006 was derived from surety bonds with existing clients?
Page 34 suggests that P&C Revenues are projected to grow 13% in 2007. Is this reasonable given a continued soft market?
Similarly, Benefits Revenues are projected to grow 9%, yet the group line has only grown 3.5% CAGR since 2002. Is this reasonable?
Finally, on the subject of growth expectations, if the Fitzmaurice acquisition is excluded from historical results, we see the
following CAGR factors (we've focused on core commissions because of unusual activity in contingents and investment income):

Core Commissions
CAGR
Excluding Fitzmaurice
Core Commissions Excluding Fitzmaurice
CAGR excluding Fitzmaurice

2002
58,129

2003
63,392

2004
69,370

2005
75,729

58,129

63,392

(4,088)
65,282

(7,831)
67,898

2006
70,882
5.1%
(7,872)
63,010
2.0%

How much does BofA estimate 2006 core commissions have increased as a result of renegotiating commission agreements
in light of eliminating contingents?
Employee Benefits adjusted EBITDA margins are lower than P&C margins, which is opposite the norm in the industry. Why?
FINANCIAL
Comments in the IM regarding expense control (Page 5): when have staff received salary increases?
Can we get detail to support "Adjusted EBITDA" totals historically and projected?
Why did Corporate Overhead Allocations disappear in 2006? (Pg 36)
What are the Gains & Losses revenue for 2006 and 2007E?
Can we get a breakout of employee benefits and payroll taxes from total compensation?
How much of Broker Expense is paid to outside brokers (either through the EB wholesaler, or through retail co brokering?).
Is any of it paid to employees?
How much core commission is direct bill versus agency bill?
What are reasonable assumptions for CAPEX during projection period?
QUESTIONS FOR MARSH
How do we quantify shared services costs/needs on a stand-alone basis?
How do we estimate investment income post-transaction?
What's a reasonable expectation about additional revenues, cost savings, or increased costs post transaction?

WALL ST. TRAINING

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Payback Period Analysis

Undiscounted Payback Period Analysis

Undiscounted Net Cash Flow

Cumulative Net Cash Flow
Positive Cash Flow?
Undiscounted Payback Period
Partial Year Payback Period
Partial Year Payback Period (One Cell)

Discounted Payback Period Analysis

Undiscounted Net Cash Flow

Cumulative Net Cash Flow
Positive Cash Flow?
Undiscounted Payback Period
Partial Year Payback Period
Partial Year Payback Period (One Cell)

278842928.xlsPaybackPeriod

Year 1
Year 2
$ (200,000)
$ 40,000
$ 60,000
(160,000)
(100,000)
4
First Year Positive
3.25
Actual Number of Years
3.25
Using arrays and index

Discount Rate

Projected
Year 3
$ 75,000
(25,000)
-

Year 4
$ 100,000
75,000
1.0

Year 5
$ 125,000
200,000
1.0

Projected
Year 3
$ 56,349
(57,701)
-

Year 4
$ 68,301
10,600
1.0

Year 5
$ 77,615
88,216
1.0

10.0%

Year 1
Year 2
$ (200,000)
$ 36,364
$ 49,587
(163,636)
(114,050)
4
First Year Positive
3.84
Actual Number of Years
3.84
Using arrays and index

Hamilton Lin, CFA, www.wallst-training.com

WALL ST. TRAINING

D9:

Wall St. Training

The Payback Period is the length of time between an initial investment and the recovery of the investment from its annual cash flow.

D20:

Wall St. Training

Discounted payback period should be greater than undiscounted payback period since the value of future cash flows are worth less.

278842928.xlsComments

Hamilton Lin, CFA, www.wallst-training.com