UPDATE 1-US Air Force lifts suspension of L-3 unit

* Company can be 'trusted,' Air Force says

* L-3 agrees to pay $333,000 in Air Force settlement

* Additional employee training planned

WASHINGTON, July 27 (Reuters) - The U.S. Air Force on Tuesday said it would allow a logistics unit of L-3 Communications Holdings Inc (LLL.N) to continue receiving federal contracts after reaching a detailed agreement with the defense contractor over the mishandling of unclassified email.

The Air Force said L-3 agreed to pay $330,000 in contract credits and fees to reimburse the Air Force for its review of the matter.

Under the agreement, L-3 acknowledged that an employee, responding to a perceived threat to proprietary data, had set up a special email condition in which certain emails sent by employees of L-3, four competitors and the government were copied to a database.

While an investigation into the incident was ongoing, the Air Force said evidence gathered to date "suggests that government emails were not intentionally journaled, and were not reviewed, opened or used."

L-3 officials told analysts on an earnings conference call on Tuesday that the company also agreed to conduct additional training for employees under the agreement, which was signed on Tuesday by Air Force Deputy General Counsel Steven Shaw, L-3 Chief Executive Michael Strianese and L-3 Corporate Ethics Officer Fred Piccirillo.

"We take matters like this very seriously," Strianese told analysts during the L-3 call, adding that such issues were of "deep concern" to him personally. "We pride ourselves on running a very tight ethics program," he said.

In June, shortly after L-3's Special Support Programs Division was suspended amid a criminal investigation of the emails [ID:nN21270116], the U.S. government re-awarded a contract worth up to $5 billion for logistics support to Lockheed Martin Corp (LMT.N).

L-3 had protested the initial contract award to Lockheed, prompting Special Operations Command to re-do the competition. But it halted that follow-on competition after the suspension and handed the contract to Lockheed, saying L-3 was not eligible anyway.

It was not immediately clear if the lifting of the suspension would have any effect on the contract.

L-3 on Tuesday said the loss of that follow-on contract under the Special Operations Forces Support Activity (SOFSA) would shave $150 million from full-year sales and 4 cents from per-share profit. The company cut its full-year outlook.

But L-3 and the Air Force both said that the emails were not used or reviewed in any way. (Reporting by Andrea Shalal-Esa and Karen Jacobs; Editing by Steve Orlofsky)