EXHIBIT 99.1 EXECUTION COPY SIRIUS SATELLITE RADIO INC. (A Delaware corporation) $175,000,000 3 1/2% Convertible Notes due 2008 TERMS AGREEMENT May 20, 2003 To: Sirius Satellite Radio Inc. 1221 Avenue of the Americas, 36th Floor New York, New York 10020 Ladies and Gentlemen: This is a Terms Agreement referenced in the Form Underwriting Agreement filed on January 3, 2003 on Form 8-K as Exhibit 1.1 to Registration Statement No. 333-64344. The terms of the Form Underwriting Agreement are hereby incorporated herein. We understand that Sirius Satellite Radio Inc., a Delaware corporation (the "Company"), proposes to issue and sell $175,000,000 principal amount of its 3 1/2% Convertible Notes due 2008 (the "Underwritten Securities"). The Underwritten Securities are convertible into shares of the Company's common stock, par value $.001 per share (the "Underlying Securities"). Subject to the terms and conditions set forth or incorporated by reference herein, Morgan Stanley & Co. Incorporated and UBS Warburg LLC (the "Underwriters") severally and not jointly offer to purchase the number of Underwritten Securities opposite their names set forth below at the purchase price set forth below, and some or all of the Option Underwritten Securities set forth below, to the extent any Underwritten Securities or Option Underwritten Securities are purchased in accordance with the terms hereof. Principal Amount of Underwriter Underwritten Securities - ----------- ----------------------- Morgan Stanley & Co. Incorporated........................... $140,000,000 UBS Warburg LLC............................................. $ 35,000,000 The Underwritten Securities shall have the following terms: 3 1/2% Convertible Notes Due 2008 --------------------------------- Title: 31/2% Convertible Notes due 2008 Rank: The notes will be senior unsecured debt and will rank on a parity with all of the Company's existing and future senior unsecured debt and prior to all of the Company's subordinated debt. Aggregate principal amount: $175,000,000 Aggregate principal amount The Underwriters have an option to of Option Underwritten purchase up to an additional Securities: $26,250,000 principal amount of Underwritten Securities (the "Option Underwritten Securities") at the public offering price, less an underwriting discount, within 30 days from the Closing Date to cover over-allotments. Initial public offering price: 100% of the principal amount and accrued interest, if any, from the Closing Date. Purchase price: 96.5% of the principal amount, plus accrued interest, if any, from the Closing Date. Underlying Securities: 724.6377 shares of common stock, par value $.001 per share, of the Company for each $1,000 principal amount of the Underwritten Securities. Indenture: Indenture to be dated as of May 23, 2003 between the Company and The Bank of New York, as amended by the First Supplemental Indenture to be dated as of May 23, 2003. Selling concession: $21.00 per $1,000 principal amount of the Underwritten Securities. Listing requirements for the Nasdaq National Market Underlying Securities: 2 Lock-up provisions: For a period for 90 days from the Closing Date, the Company and certain of its executive officers will not, without the prior written consent of Morgan Stanley & Co. Incorporated, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (a) the sale of any Underwritten Securities to the Underwriters pursuant to the Form Underwriting Agreement and this Terms Agreement or (b) transactions relating to shares of common stock or other securities acquired in open market transactions after the completion of the Public Offering. In addition, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, none of such officers will, during the period commencing on the date hereof and ending on August 20, 2003, make any demand for or exercise any right with respect to, the registration of any shares of common stock or any security convertible into or exercisable or exchangeable for common stock. Such officers will also agree and consent to the entry of stop transfer instructions with the Company's transfer agent and registrar against the transfer of the such officers' shares of common stock except in compliance with the foregoing restrictions. Comfort letter: The Company shall cause the Accountant's Comfort Letter and the Bring-down Comfort Letter referenced in, respectively Section 5(g) and Section 5(h) of the Form Underwriting Agreement to be delivered, except that such letters will be delivered by Ernst & Young LLP in lieu of Arthur Andersen LLP. Additional Representations of The Company represents and warrants to the Company: and agrees with each of the Underwriters that there are no contracts, 3 agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Underwritten Securities registered pursuant to the Registration Statement. Additional Covenants of the The Company covenants with each of the Company: Underwriters whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including: (i) the cost of printing or producing any Blue Sky or Legal Investment memorandum in connection with the offer and sale of the Underwritten Securities under state securities laws and all expenses in connection with the qualification of the Securities for offer and sale under state securities laws as provided in Section 3(f) of the Form Underwriting Agreement, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky or Legal Investment memorandum, (ii) the cost of printing certificates representing the Underwritten Securities, (iii) the costs and charges of any transfer agent, registrar or depositary, (iv) the document production charges and expenses associated with printing this Agreement and (v) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in Sections 4, 6 and 7 of the Form Underwriting Agreement, "Additional Covenants of the Company" and "Additional Termination Provisions" below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Underwritten Securities by them and any advertising expenses connected with any offers they may make. Additional Conditions of The obligations of the Underwriters to Underwriters' Obligations: purchase and pay for the Underwritten Securities pursuant this Terms Agreement are subject to the following further conditions: subsequent to execution and delivery of this Terms Agreement and prior to the Closing Date there 4 shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement) that, in Morgan Stanley & Co. Incorporated's judgment, is material and adverse and that makes it, in Morgan Stanley & Co. Incorporated's judgment, impracticable to market the Underwritten Securities on the terms and in the manner contemplated in the Prospectus. Additional Termination The Underwriters may terminate this Provisions: Terms Agreement, by notice to the Company at any time at or prior to the Closing Date if (i) trading is suspended or materially limited on, or by, as the case may be, any of the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) a material disruption in securities settlement, payment or clearance services in the United States shall have occurred, or (iii) there shall have occurred any outbreak or escalation of hostilities, or any change in financial markets or any calamity or crisis that, in Morgan Stanley & Co. Incorporated's judgment, is material and adverse and which, singly or together with any other event specified in this clause (iii), makes it, in Morgan Stanley & Co. Incorporated's judgment, impracticable or inadvisable to proceed with the offer, sale or delivery of the Underwritten Securities on the terms and in the manner contemplated in the Prospectus. If this Terms Agreement shall be terminated by any Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Terms Agreement, or if for any reason the Company shall be unable to perform its obligations under this Terms Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Terms Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Terms Agreement or the offering contemplated 5 hereunder. Additional Indemnification Provisions: The Company agrees to indemnify and hold harmless each affiliate of an Underwriter within the meaning of Rule 405 under the 1933 Act. Other Terms: This Terms Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Notices: All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, NY 10036, Attention: Global Capital Markets Syndicate Desk; notices to the Company shall be directed to the Company at 1221 Avenue of the Americas, 36th Floor, New York, New York 10020, Attention: Patrick L. Donnelly, Executive Vice President, General Counsel and Secretary. Closing Date and location: May 23, 2003 10:00 a.m. Cravath, Swaine & Moore LLP Worldwide Plaza 825 Eighth Avenue New York, NY 10019-7475 6 Please accept this offer by signing a copy of this Terms Agreement in the space set forth below and returning the signed copy to us. Very truly yours, MORGAN STANLEY & CO. INCORPORATED, UBS WARBURG LLC, by MORGAN STANLEY & CO. INCORPORATED --------------------------------- Name: Title: Accepted: SIRIUS SATELLITE RADIO INC., by -------------------------------------------------- Patrick L. Donnelly Executive Vice President, General Counsel and Secretary 7