Redemption agreements must conclude with a succinct and clearly written “Mutual Release of Claims” paragraph. Here, the drafters of the redemption agreement should write that the Investor, on behalf of itself as well as each of its officers, directors, agents, employees, etc., will release the company from all liabilities, claims, demands, etc. that arise out of or relate to the redemption agreements or any of the former agreements signed by and between the too parties - such as an Amended or Restate Note, Merger Agreement, Registration Rights Agreement, or any other transaction documents. Note that this should not include, however, a release of all claims that may arise out of a breach of the agreement.

Likewise, the company, on behalf of itself and all of its agents, should release the investors from any and all liabilities, claims, demands, etc. arising out of the redemption agreement or any former agreement; but again, this should not cover claims arising out of a breach of the redemption agreement. Sometimes the drafters may even want to specifically state that both parties waive all rights otherwise conferred to them under the law. California Civil Code Section 1542, for example, states that “a general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him would have materially affected his settlement with the debtor.” Seems fair, right? But in an effort to completely eliminate the possibility of litigation between the parties, drafters will sometimes want to include language stating that both parties waive any rights conferred to them by those sorts of statutes.

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