Letter Agreement dated July 20, 2005



 Exhibit 10.3 
  
 July 20, 2005 
  
 CONFIDENTIAL 
  
 Paul Royalty Fund, L.P. 
 Paul Royalty Fund Holdings II 
 c/o Paul Capital Management, L.L.C. 
 50 California Street 
 Suite 3000 
 San Francisco, CA 94111 
 Attention: Chief Financial Officer 
  
 Walter Flamenbaum, M.D. 
 Mr. Lionel Leventhal 
 Paul Capital Partners 
 140 East 45th Street, 44th Floor 
 New York, NY 10017 
  
 Ladies and Gentlemen: 
  
 Reference is made to the Revenue Interest Assignment Agreement dated October 28, 2003 (the “RIAA”), among Artery, LLC (“Assignor”),
Guilford Pharmaceuticals Inc. (“Guilford”), GPI Holdings, Inc., Paul Royalty Fund, L.P. (“PRF”), and Paul Royalty Fund Holdings II (together with PRF, the “Assignees”). Capitalized terms used in this letter without
definition shall have the meanings given to those terms in the RIAA. 
  
 Guilford has advised Assignees that Guilford may enter into a transaction (the “Transaction”) with MGI Pharma, Inc. (the “Purchaser”) that, if consummated, will result in the Change of Control of Guilford. As a condition
to entering into the Transaction, the Purchaser has asked Assignees to confirm, by their signatures below, that Purchaser may repurchase the Assigned Interests in whole, without any recourse, representation or warranty by the Assignees, for the
amount calculated in accordance with Schedule A of this letter (the “Repurchase Amount”), and upon such repurchase terminate any and all obligations of Guilford (including its Subsidiaries and Affiliates) under the Transaction
Documents (except to the extent that such obligations survive the termination of the Transaction Documents in accordance with their respective terms and excluding the Warrants). Upon payment in full of the Repurchase Amount, the Assignees will
terminate, release and discharge all security interests and liens which it may have on any real or personal property of Guilford (including its Subsidiaries and Affiliates) and file UCC termination statements with respect to any such security
interests or liens. 








 Paul Royalty Fund, L.P. 
 Paul Royalty Fund Holdings II 
 Walter Flamenbaum, M.D. 
 Mr. Lionel Leventhal 
 July 20, 2005 
 Page 2 of 4 
  
 In consideration for the confirmation
provided by Assignees pursuant to this letter, Purchaser, by its signature below, agrees to repurchase the Assigned Interests for the Repurchase Amount on or before the consummation of the Transaction. The agreements set forth in this letter shall
terminate if (i) the agreement regarding the Transaction is terminated prior to the consummation of the Transaction, (ii) a definitive agreement regarding the Transaction is not executed by Guilford and the Purchaser prior to August 31, 2005,
or (iii) the Transaction does not close on or before December 31, 2005. 
  
 The parties understand and agree that until such time as the Repurchase Amount is paid, the RIAA and Transaction Documents shall remain in full force and effect. 
  
 Please indicate your acceptance of matters set forth in this letter by counter signing this letter in the space provided and
returning this letter by overnight mail to Guilford Pharmaceuticals Inc., 6611 Tributary Street, Baltimore, MD 21224, Attention: Asher M. Rubin, Senior Vice President, General Counsel and Secretary, and by facsimile ((410)-631-6899). 
  

			
	 Sincerely,

	
	 GUILFORD PHARMACEUTICALS INC.

		
	 By:
	 	 
	 Name:

	 Title:



  

					
	 PAUL ROYALTY FUND, L.P.

		
	By:	 	 Paul Capital Management, LLC,
 Its General Partner

			
	 	 	 By:
	 	 
	 	 	 Name:

	 	 	 Title:


  
 [signatures continued]








 Paul Royalty Fund, L.P. 
 Paul Royalty Fund Holdings II 
 Walter Flamenbaum, M.D. 
 Mr. Lionel Leventhal 
 July 20, 2005 
 Page 3 of 4

  
  

							
	PAUL ROYALTY FUND HOLDINGS II
		
	By:	 	Paul Royalty Fund II, L.P.,
	 	 	 Its Managing Partner

			
	 	 	By:	 	 Paul Capital Royalty Management, LLC,
 Its General Partner

				
	 	 	 	 	By:	 	 
	 	 	 	 	 Name:
	 	 
				
	 	 	 	 	 Title:
	 	 

  
  

			
	 MGI PHARMA, INC.

		
	By:	 	 
	 Name:

	 Title:
	 	 

  
  
  
  







 Schedule A 
  

The Repurchase Amount shall be an amount equal to the Assignees Option Repurchase Price (calculated at the time of payment of the Repurchase Amount in accordance with
Schedule 5.07(a) of the RIAA) less payments previously made by Guilford and Artery to Assignees, but without the application of the factors set forth on Schedule 5.07(c) of the RIAA to such payments and without any adjustment for the Warrants
(which shall be retained by Assignees). For illustrative purposes, if the Repurchase Amount would have been paid as of June 30, 2005, the Repurchase Amount would have been $59.29 million, calculated as follows: 
  

						
	 All amount in table are in millions
  
 Assignees Option Repurchase Price Calculation as of 6/30/05 (Schedule 5.07(a))
	  	$	68.32
	 Credits to Assignees Option Repurchase Price (no multiplication factor, as negotiated) for amounts received:
	  	 	  	 	 
	 	  	        2003	  	$	0.14
	 	  	        2004	  	$	5.76
	 	  	6/30/2005	  	$	3.13
	 	  	Total credits through 6/30/05	  	$	 9.03
	 Illustrative Repurchase Amount
	  	$	59.29

  
 Initials: 
  
 GUILFORD PHARMACEUTICALS
INC. 
  
             _____ 
  
 PAUL ROYALTY FUND, L.P. 
  
             _____ 
  
 PAUL ROYALTY FUND HOLDINGS II. 
  
             _____ 
  
 MGI PHARMA, INC. 
  
             _____