Lockheed Martin and US officials had urged them to do so as this move helps prevent termination fees and diplomatic backlash from Germany and Italy, who are partners of the US in the development of MEADS.
The contract calls for the US to pay termination fees that are roughly equal to the $380 million that the US has made available. The last year of funding had been blocked earlier, because it didn't make sense to help fund a program that will not be used by the US.
The United States is currently confronting some cuts in defense spending and MEADS was seen as a good candidate to help reduce spending. However, thanks to some politicians, MEADS is now set to again receive funding.
About $4 billion has already been spent on MEADS, a successor of the Patriot Air Defense System. In the event that the UC withdraws from the program, Lockheed Martin has stated that it intends to keep working on MEADS with Italy and Germany.
MEADS will be tested later this year if it can interecept a ballistic missile target. Lockheed Martin claims MEADS will offer capabilities that the US lacks. It will be cheaper to operate and be able to provide wider coverage.
MEADS is to use the new Patriot Advanced Capability-3 Missile Segment Enhancement (PAC-3 MSE). The PAC-3 MSE is an improved version of the PAC-3 missile, featuring improved manoeuvrability and extended range of up to 50 percent.
In Germany, it may also be complemented by the shorter-range IRIS-T SL missile. This missile is derived from the air-to-air IRIS-T missile, somewhat similar to how the Evolved Sea Sparrow Missile (ESSM) came to be.
Still, even if development of MEADS does get completed, it will find it hard to find widespread adoption in many countries due to competing systems with the possible exception being Germany.
In the US, MEADS will have to compete with the Patriot Defense System, which continues to be constantly upgraded and modernized. In Italy, there is the SAMP/T Air Defense System that has already entered service and performs a similar role as MEADS.