Prince George's County has agreed to $7,500 out-of-court settlement to a million-dollar suit brought by the family of William Ray, A Washington man who was shot to death by a county police officer on Christmas Eve 1977.

The shooting of Ray, a 32-year-old black man, by a white county police officer as Ray fled from the Seat Pleasant police station, exacerbated racial tensions in the county, resulted in the officer's temporary dismissal, and led to changes in county police regulations on the use of deadly force.

The civil lawsuit was filed by Ray's mother against the county and the police officer involved in the shooting, Peter F. Morgan. The suit alleged that Morgan had violated Ray's civil rights and had caused his "wrongful death."

County attorneys and the lawyer for Ray's survivors refused to disclose the amount of the settlement, which was made Tuesday, but The Washington Post learned that it was approximately $7,500.

"Money cannot compensate for the fact that you have a person around that you don't want around," said the attorney for Ray's mother, Paris A. Artis. "My client would have much rather he not be back on the force."

Following the shooting a grand jury investigated the case and found there was insufficient evidence to indict Morgan on a criminal charge.

A county police trial board found that Morgan had used excessive force in the shooting, and then-police chief John W. Rhoads, following the trial board's recommendation, fired Morgan.

Morgan appealed his firing to a county circuit court judge, who found that the board had erred and asked it to reconsider the case. The trial board then reinstated Morgan.

Controversy surrounding Morgan's shooting of Ray and his subsequent firing was one of the factors that led county police to state an eight-day work slowdown during the summer of 1978 and vote "no confidence" in Chief Rhoads.

Morgan, now assigned to the Bowie district station said yesterday he was satisfied with the settlement but would have preferred a trial to prove he had done nothing wrong. "They [the Ray family] don't deserve a dime," he said. I feel totally vindicated. They got their blood money."