There is excellent suggestions here to consider. If you decide to give this engineer options for his contribution, make sure you have agreed upon deliverables along the way, giving each deliverable a value. That way, if there is a performance issue, or non performance, then you are not obligated.
I'm very curious as to why he is asking for a Royalty, of all available choices. you might ask him what he accomplishes for himself by receiving a royalty. Perhaps, what ever his need is could be satisified in ways that would work equally well for both of you.
I favor you raising capital. Crowd funding will be available in May of this year. You may be able to take advantage of that. If you are interested to learn more about this, let me know. I know an expert or two on this. Good luck to you.