Oloc looks at Swede. "Tell your men to be cautious. My companions are up there, staking out the cave. If they are surprised by your men, things may get ugly unnecessarily."
Swede simply glares at Oloc and raises a hand for silence.
Duran remains hidden, bow at the ready, waiting to react depending on what happens to his comrades.
Varros stands his ground and lowers his bow slightly to appear less threatening and says steadily to all in earshot, "Everyone hold, we have a misunderstanding."
Gaven sneers at Varros's words, muttering almost inaudibly, "Filthy hobgoblins." Gaven grounds the butt of his spear into the ground, but does not loosen his grip on either spear or shield.
The advancing hobgoblins visibly perk up at Varros' words. They zero in on the group and dash forward, charging in from three sides.
Seeing the charge, Duran unleashes on the hobgoblin nearest him, Anders, but both his arrows fly wide of the mark.
Varros raises his bow to shoot at Axel, coming straight toward him up the middle. His first arrow is deflected by a tree branch, but a second rapid shot pierces the hobgoblin through the chest. The force of his adversary's charge carries him forward where he drops dead on the ground at Varros' feet.
Meanwhile to the right, Lars plows through the undergrowth. With the butt of his spear already pressed into the ground, Gaven is in a position to simply brace behind his shield and receive the charge.
Lars is quick and cagey, however, and at the last second he sidesteps the spear, then takes a spinning swing at Gaven with his axe, slicing the cleric across the arm (OOC: damage 3 hp).
At almost the same time, Anders rushes in from the left and tries to bowl Varros over. But Varros is swift to react and he easily moves out of the way as his new enemy hurtles past him.
Swede listens intently to the combat which he cannot see. Oloc can sense that the big bounty hunter is not happy with what he hears. Silently, but in deadly earnest, Swede motions for Oloc and the hirelings to keep quiet and start moving back down the trail westward, away from the bandit cave.
Given that I rolled a charge for the three hobgoblins' reaction, I made what seemed the most logical responses for your PCs based on comments regarding intentions, equipment in hand, or stance (e.g., that Duran would shoot once violence appeared inevitable, that Varros could get his bow up quickly enough from its slightly lowered position to shoot before the charge came home, and that Gaven, grinding the butt of his spear into the ground would simply set it and receive the charge).
Visibility/Targeting Notes: Essentially the same as before. Duran can see everybody, and at a glance he can see that Swede is trying to move the hostages (and he realizes he may not be able to see them much longer). Gaven is engaged in melee, but sees Duran, Varros, Lars and Anders. Varros is not technically engaged in melee, as Lars' momentum from the charge carried him past. Varros sees Duran, Varros, Lars and Anders as well. There is no indication that any of the hobgoblins have actually spotted Duran.
Initiative: Duran, Varros and Gaven 5 – Hobgoblins 1
Shoots at Anders: d20 = 8 + 2 (close range) -1 (cover) = 9
Shoots at Anders: d20 = 7 + 2 (close range) -1 (cover) = 8
Shoots at Axel: d20 = 12 + 2 (close range) -1 (cover) = 13 (miss)
Shoots at Axel: d20 = 15 + 2 (close range) -1 (cover) = 16 (hit); d6 = 5 (Axel killed)
Receives Lars' charge: d20 = 3 (miss)
Lars: d20 = 19 + 1 (normal to hit bonus for his HD) = 20; d6 = 3.