HARTLAND -- A five-month-old dispute about former town manager Peggy Morgan has come to an end.

Morgan has signed a separation agreement with the town government in which she voluntarily resigns as town manager and drops her complaint of being unfairly dismissed. In return, she gets nearly a year's worth of compensation pay and health benefits.

The Select Board, which had all but fired Morgan in October, signed the deal at a special meeting Monday night. In addition, selectmen signed a five-year contract with Larry Post, who was brought in as acting town manager in November. He will be paid an annual salary of $55,000, which increases to $57,000 on July 1.

Post said he agreed to stay on as town manager to help the town get its financial house in order.

"I'm looking forward to the challenge," he said.

The town of Hartland is attempting to recover from a financial crisis, which, according to a review by Post, was caused by expenses that were not accounted for in town budgets since 2005. At a special town meeting in December, residents voted to increase taxes to pay for a $350,000 budget shortfall. Post has proposed borrowing another $650,000 in the coming year to cover more unpaid expenses.

Morgan, 58, initially said she was upset with selectmen about her dismissal and thought that they were blaming her for the town's financial woes. Morgan, who served as Hartland's town manager for almost 30 years, had been out on paid medical leave for cancer treatment since Sept. 4, 2008. On Oct. 7, she told selectmen that her tumor was gone and she felt well enough to return to work, but selectmen said they didn't want her back.

On Tuesday, reflecting the conciliatory tone of the joint agreement, Morgan backtracked on her earlier complaints.

"During that period of time I was very ill," Morgan said. "The agreement is fine; I have no problems with it."

As part of the separation agreement, the town government released a public statement, saying Morgan resigned Feb. 16, 2009, after 32 years "of dedicated service" as town treasurer and tax collector and as town manager.

"Peggy resigned her position solely for medical reasons," the statement says. "We wish to thank Peggy for her excellent and tireless service to the town and wish her all the best for a speedy recovery."

The agreement has been in the works for months and was reviewed and approved by attorneys for both Morgan and the town. It says Morgan will receive severance pay, based on her previous salary, and health insurance coverage until Dec. 31 this year. Last year, according to the town report, Morgan was paid $44,512 a year.

The town has also agreed to pay $5,000 in attorney's fees to the Augusta law firm Johnson & Webbert, L.L.P., which has represented Morgan in connection with "alleged claims of unlawful discrimination."

Morgan further agrees that the payments and benefits "provided by this agreement are greater than any which (Morgan) would otherwise be entitled by law or under employment policy." As a result, Morgan agrees to drop complaints against the town.

Suzan Ackerman, a Hartland resident who organized a public demonstration in mid-October following Morgan's dismissal, said she continues to support Morgan.

"A lot of people are not happy with taxes going up," Ackerman said. "But I hope townspeople realize it's not one person who is at fault."

Morgan said chemotherapy treatment has taken its toll on her and that she is scheduled to undergo more testing soon.

"You never know how tired you are until you don't do anything," Morgan said, referring to her absence from the job. As far as regaining her health, "I've got a long ways to go."