WASHINGTON, (Reuters) - The U.S. State Department
said Monday the private security contractor previously
known as Blackwater Worldwide had agreed to a $42 million
penalty to settle charges it violated hundreds of U.S. export
rules between 2003 and 2009.

The company, which has protected U.S. officials in Iraq and
Afghanistan and is now known as Xe Services, had been accused
of unauthorized weapons exports and "defense services" deals
for end users in a number of countries.

The State Department said that with the deal, which was
first reported by the New York Times, the company will no
longer been deemed ineligible for future contracts with the
U.S. government.

"The Department is satisfied that the company has taken the
necessary steps to address the causes" of its export control
violations, the State Department said in a statement, adding
that $12 million of the penalty would be suspended to help make
up for some of the company's compliance measures.

"The Department has determined that the policy of denial is
no longer necessary."

The privately held company, based in North Carolina, is up
for sale.

The Times said that the violations included illegal weapons
exports to Afghanistan, making unauthorized proposals to train
troops in southern Sudan and providing sniper training for
police in Taiwan.

The settlement does not resolve other legal troubles still
facing the company and its former executives and other
personnel, include the indictments of five former executives on
weapons and obstruction charges, a federal probe into whether
company officials tried to bribe Iraqi officials, and the
arrest of two former Blackwater guards on federal murder
charges in the killing of two Afghans.

A U.S. court has dismissed charges against Blackwater guards
accused of killing 14 Iraqi civilians in Baghdad in 2007. A
federal investigation into Blackwater's weapons shipments to
Iraq brought guilty pleas from two former Blackwater employees.

The Times noted that the company lost its largest federal
contract last year, providing diplomatic security for U.S.
Embassy personnel in Baghdad, but it still has existing
contracts to provide security for the State Department and CIA
in Afghanistan.

(Reporting by Andrew Quinn; Editing by Cynthia Osterman)