Well i have always discouraged such kind of agreements which condone the act of extortion. This is your call. I would advise against it. An illegal agreement cannot stand in court. This is an illegal agreement.
If you still want to go ahead then make a registered agreement by paying stamp duty.
State the full facts and the issues involved. State the amount being asked and why are you paying it.
Register the agreement. You cannot compel him to honour the agreement as you again have to go to the courts to ensure compliance.
But this is what you may do.