Nike Inc. will recall shoes carrying a logo that offended Muslims because it resembled the word "Allah" in the Arabic script, the shoemaker and an Islamic group said.

Under the written agreement between Nike and the Council on American-Islamic Relations, Nike will apologize to Muslims and recall shoes with the logo. In exchange, the council will urge Muslims worldwide not to boycott Nike products.Executives from the Islamic council said the written agreement was a victory for Muslims in the United States.

"We wanted to reinstate confidence in our community that whenever they see something offensive, there could be something done about it, that through organized work they can stand up for their principles and show people they have to be respected," said Nihad Awad, the Islamic council's executive director.

Nike spokesman Roy Agostino said company officials are pleased with the settlement.

"From the outset we have sought to avoid any offense to Muslims," he said. "We have, through this process, developed a deeper understanding of Islamic concerns and Islamic issues and . . . have opened up a broader dialogue with members of the Islamic community."

Agostino said it was the first time that Nike has recalled a product.

The dispute between CAIR and Nike began when the athletic footwear company used a logo meant to look like flames on a line of shoes to be sold this summer with the names Air Bakin', Air Melt, Air Grill and Air B-Que.

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Nike said it caught the problem in September, long before the shoes went into production, and designed a new logo, but Muslims said the new design still resembles the word Allah.

In addition to apologizing and recalling the shoes, the two sides said Nike would work with the council to improve the company's understanding of Islamic issues and would donate a $50,000 playground to an Islamic elementary school somewhere in the United States.

This is the second time in recent years that Nike was criticized by the council.

In 1995, after the council complained, the shoe company removed a billboard near the University of Southern California that depicted a basketball player with the headline, "They called him Allah."

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