I used an existing script in the game, nw_c2_i_surren, I copied it onto a new script page and renamed it and added a SpeakString at the bottom with what I wanted my NPC to say when he surrendered. I also changed the hit points from 30 to 40 because I wanted to make sure he had enough time to surrender without someone accidentally killing him. (Dalen always did that to me in the original game, the person would say, "I surrender!" just as he was swinging his axe and, oops, too late.) The script went on the UserDefined event of the NPC.
The rest of it with the choices of killing or redeeming and what not can be handled in the conversation the PC has with the NPC after they surrender.
Hope that at least helps a bit. Others with more experience may have better ideas.