Libyan government lawyers have set conditions for compensating families of Pan Am 103 victims with $10 million each and for recovering the money if the terms are not met.

Under the demand, the final $2 million would be paid only after the United States removes Libya from its list of countries that sponsor terrorism.

The Libyan position was disclosed in a letter to the families from the New York-based law firm Kreindler & Kreindler, which represents them.

Much of the letter reaffirms details of a Libyan offer that was announced in May.

Libya is offering to pay $2.7 billion from an escrow account to the families of the 270 people who died in the bombing of Pan Am 103 as it flew over Scotland on Dec. 21, 1988.

A Scottish court convicted a Libyan agent of participating in the bombing.

The U.N. Security Council has demanded compensation for the families, among other requirements, as a condition for lifting sanctions against Libya, which have been suspended since 1999.

A key hurdle blocking a settlement is a Security Council demand that Libya accept responsibility for the bombing. The United States has its own set of sanctions separate from those of the United Nations.

The letter to the families, copies of which were made available to some media outlets Tuesday by members of families, reaffirms that Libya will pay immediately $4 million to each family once Libya has complied fully with U.N. requirements.

An additional $4 million would be released once Libya is in compliance with U.S. requirements. Finally, $2 million would be paid once the United States removes Libya from the terrorism list.

The letter says the occurrence of each of these three events "cannot be guaranteed and could be impacted by factors that are completely out of our [the families'] control."

It said that if none the three events occur within the eight-month term of the Libyan escrow account, and the United Nations and the United States have not lifted their sanctions, "the settlement will be void [and] the funds in the escrow account will be returned to Libya."

Finally, the letter said that if only one or two of the three events occur, the family of each decedent will receive at least $5 million in exchange for dismissal of the families' lawsuit.

The letter was sent after lawyers for the family returned from Paris, where they negotiated a written agreement with Libyan representatives. It embodies the substance of terms reached earlier.

The letter added that the agreement was made subject to approval of the representatives of each victim's family.