SOUTH BOUND BROOK -- After years of bitter division and calls for him to step down, Bishop Joe Morris Doss announced his resignation at the beginning of the Episcopal Diocese of New Jersey's annual convention yesterday.

The financially troubled diocese, which serves 64,000 members in 14 counties, will pay a heavy price. Doss' separation package is worth $1.2 million, which includes his full salary and extensive benefits -- about $120,000 annually -- until his official resignation date of September 30, 2001, officials said. He will begin a "sabbatical leave of absence" June 30 and will not have any duties after that date.

While rumors have swirled for days, the announcement retained plenty of shock value. Members listened in silence as they watched an almost unprecedented scene: the resignation of a sitting bishop of a divided diocese.

Bishops are typically elected to serve the remainder of their lives. A national leader in the Episcopal church called it "almost unprecedented."

"I am profoundly sorry to announce to you that I cannot be the one called to lead the Diocese of New Jersey into a new millennium," Doss said.

Doss said he didn't step down due to a lack of support or the investigation of his finances. But he acknowledged he can no longer lead what he called "the battered and beleaguered diocese."

He said, "I came to the conclusion that I am in the way."

Most of the 800 diocesan members said they hoped it was the end of an ugly and painful chapter for the diocese.

Churches have withheld money and factions for and against Doss have fought bitterly, particularly in the past two years. Doss' opponents said he was dishonest and divisive. An attorney was hired to investigate Doss' alleged financial improprieties.

His backers said conservative members disagreed with his desire to allow women and homosexuals to have more open roles in the church.

Comparing himself to Jeremiah, who warned those not to cry "peace" when there is no peace, Doss said, "You must not allow your opportunity for healing, reconciliation and reform to pass. Much work has been done, much learning has occurred, a great price has been paid."

Doss spoke candidly about the attacks against him. While he gave a general apology for any sins of hurting others, Doss didn't say he accepted responsibility for having to step down.

"For some of you it may seem to be a joyful occasion and for others, a tragedy," said Doss, who called himself "a lightning rod, which has drawn fire to light up the landscape and expose it."

Doss said his election and tenure have shown the need for healing and reconciliation. After a 28-minute address, Doss and his family walked out of the Ukrainian Orthodox Cultural Center, the site of the convention.

MEMBERS STOOD and politely clapped as Doss briskly walked out, but the applause ended almost immediately after he left the convention hall.

Top elected leaders of the church had called for Doss' resignation and agreed earlier this week to offer a generous separation package to get him to step down.

Diocesan officials admitted that they aren't sure how they are going to pay $1.2 million buyout. The diocese revenues for 1998 were $1.5 million, said Peter Hausman, the treasurer of the diocese.

Doss' package calls for a host of generous incentives, including $200,000 to pay for the educational costs of his two children; $200,000 in pension payments to be spread over six years; $150,000 for part of the mortgage on his Lawrence Township home, which he must sell by 2001; and a payment of $100,000 "payable at any time within the next three years at the bishop's request."

Charles Lee, a member of the diocese, said there were a number of factors for the generous package. He said Doss had been paid less than other bishops and since he is relatively young at 55, the diocese had an obligation to compensate him fairly.

While supporters of Doss insisted he retained the trust of many members, trust in Doss had eroded in the last two years.

One of the turning points came in November 1997 when it was revealed that Doss had asked a minister to send negative information about a top diocesan official, the Rev. Alan French, to a church that had wanted to hire him. Doss denied doing so, but later admitted it and apologized to an audience at the Trinity Cathedral in Trenton.

At last year's convention, 41 candidates who supported Doss ran for diocesan offices. All 41 lost to candidates opposing the bishop.

Questions also surrounded his handling of finances. The top elected panel of the diocese, the Standing Committee, hired attorney Michael Cole to investigate Doss' handling of money. Cole completed the report and submitted it to the Standing Committee, which reviewed it this week.

But as part of Doss' settlement, that report won't be released, said French, who is the president of the committee.

After Doss' resignation yesterday, French claimed no joy but pointed to the pain he said the bishop has caused the diocese.

While sympathizing with what he called the shattering of Doss' dreams and career, French said, "I've seen too many lives destroyed over the past four years."

The national Episcopal Church has followed the division over Doss closely. Presiding Bishop Frank Griswold, head of the national church, earlier this year tried unsuccessfully to broker a deal which would have called for Doss to step down in 2002. Doss' opponents said then that they would pay him until that time but wanted him to begin a sabbatical this month. Doss refused the deal.

The Rev. Clay Matthews, an official with the national church, said he didn't recall in his lifetime any bishops retiring for such a reason.

"There is a collective sense of loss, especially the loss of what could have been and what was hoped for as well," said Matthews.

The church's loss of unity has led to a loss of money for the Diocese of New Jersey. Citing a lack of faith in Doss, two dozen churches have withheld payments to the diocese.

With the bishop's resignation, diocesan officials said they hoped that those churches would begin supporting the diocese again and boost revenues.

The diocese didn't pay any of its $500,000 commitment to the national church last year. Because of the diocese's financial troubles, its proposed budget for fiscal year 2000 calls for only a $36,000 contribution to the national church, although that could grow if churches resume their support.

LaTonya Johnson, senior warden of the Trinity Cathedral in Trenton and Doss' former office manager, said the ordeal has been especially hard for her.

"There's a relief, but I have mixed emotions," she said.

When asked if this was good for the diocese, she said, "It wasn't right or wrong. It was necessary."

NOTE: The Associated Press contributed to this report.