| A royalty is where one company/individual is going to pay another company/individual for the use of something the second company owns or has some claim to. Normally, it's used for intellectual property. i.e. a book written, software, a movie, or even an idea. (e.g. I buy a book that the book store has purchased from the publisher. But the publisher will pay the writer of the book a royalty for each sold.) But I suppose it could be used for a plant asset also.
A royalty agreement is simply like any other agreement -- it's the agreement (hopefully on paper) of all the technicalities about how the property will be used and how the royalties will be paid. | 
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