Families of Pan Am 103 victims said Friday they will not agree to a Libyan compensation offer until that country meets U.N. Security Council demands.

About 20 family members met with Assistant Secretary of State William Burns and discussed a deal under which Libya would pay $2.7 billion in compensation to the families for the 1988 bombing of the Pan Am plane.

The compensation payments, amounting to $10 million per family, would be guided by a formula under which funds would be released progressively as U.N. and U.S. sanctions against Libya are lifted.

Details of the arrangement were disclosed last week by lawyers for the family members who negotiated with a Libyan team for 10 months. The State Department was not a party to the talks.

Burns and British officials discussed the issue Thursday in London with Libyan diplomats.

Five family members who spoke to reporters after the State Department meeting said there was broad agreement among those attending that Libya must meet all U.N. requirements as the next step in the process.

This position parallels that of the State Department. Spokesman Richard Boucher said before Friday's meeting: "There is no shortcut for the Libyans to get around the requirements of the U.S. Security Council resolutions."

Daniel Cohen, who lost a daughter in the Pan Am 103 bombing, rejected suggestions by family lawyers that the first payments on the $2.7 billion proposed settlement could be made this summer.

"There is a long way to go," he said, expressing unhappiness with the way the agreement was structured. "Everybody is pledged to go back to the lawyers and say 'Fix it,"' he said.

Said Katherine Flynn, who lost a son on the doomed flight, "It's not what the United States has to do.... It's what Libya has to do to comply."

Cohen said the lawyers must remove the link between payment of compensation and the lifting of sanctions.

The U.N. sanctions can be lifted only after Libya agrees to pay compensation, accepts responsibility for the bombing, renounces terrorism and discloses all it knows about the tragedy.

The bombing killed all 259 persons aboard plus 11 more on the ground in Lockerbie, Scotland. A Libyan intelligence agent was convicted in the bombing last year.

Once U.N. sanctions are lifted, the Bush administration will discuss with Libyan authorities bilateral sanctions that the United States has imposed.

Cohen said Burns told the group the United States will demand that Libya eliminate programs to develop chemical and biological weapons, among other requirements, before more normal relations can be established.

Boucher made no reference to any such demand before the meeting. He said there can be no change in the U.S.-Libyan bilateral relationship until Libya meets U.N. requirements.