NEW YORK • Two black men arrested while waiting at a Philadelphia Starbucks have reached a confidential financial settlement with the coffee chain and dropped legal claims against the city.

The city agreed to pay each man US$1 (S$1.33) and committed US$200,000 to fund an entrepreneurship programme for public school students.

That is what the men asked for when they approached city officials and agreed not to file a lawsuit against Philadelphia or its employees after they were arrested in an episode that ignited widespread criticism of Starbucks and the city's police.

On Wednesday, Starbucks said it had reached an agreement with Mr Rashon Nelson and Mr Donte Robinson that "includes a confidential financial settlement".

"I am pleased to have resolved the potential claims against the City in this productive manner," Mayor Jim Kenney of Philadelphia said in a statement. "This was an incident that evoked a lot of pain in our city, pain that would've resurfaced over and over again in protracted litigation."

On April 12, Mr Nelson and Mr Robinson were sitting in a Starbucks in Philadelphia's Centre City neighbourhood. They were waiting for another man, Mr Andrew Yaffe, who is white, for a business meeting. When they asked to use the restroom before they had purchased anything, an employee said no. They were eventually asked to leave, and when they did not, an employee called the police.

What happened next was captured on videos that have been viewed millions of times on social media. Just as Mr Yaffe was arriving for the meeting, police officers were putting handcuffs on the men and leading them out of the cafe.

"What did they get called for?" Mr Yaffe asked in the video, referring to the police. "Because there are two black guys... meeting me?"

The arrests prompted a #BoycottStarbucks campaign and protests at the store in Centre City.

Starbucks apologised on social media, and Mr Kevin Johnson, its chief executive, released a statement in which he called the arrests a "reprehensible outcome".

The employee who called the police was fired. Starbucks also announced that it would close its US stores on May 29 to give anti-bias training to 175,000 employees.

A spokesman for Philadelphia said the US$200,000 pledge would be spent on a pilot programme for high school students who want to become entrepreneurs, and city officials will work with Mr Robinson and Mr Nelson to develop a grant committee.

Starbucks also said it had invited the men to complete their undergraduate degrees through the company's tuition-paid online education partnership with Arizona State University.

NYTIMES, AGENCE FRANCE-PRESSE, REUTERS