Bank of Scotland
                                                              Corporate Banking
                                                                155 Bishopsgate
                                                                         London
                                                                       EC2M 3BY



                                                Direct Line:      0207 012 9188
                                                Fax:              0207 012 9459

London Pacific Group Limited
(Company Number 30810)
6 Minden House
Minden Place
St Helier
Jersey
(the "Parent")

and each company listed in Schedule 8



                                                               20 December 2002

Dear Sirs,

TERM LOAN AND GUARANTEE FACILITY OF UP TO $23,000,000

We are pleased to offer London  Pacific Group Limited and each company listed in
Schedule 8 (each a "Borrower" and together the  "Borrowers") an extension of the
multicurrency  facility reduced to $23,000,000 (the  "Facility").  This offer is
open for acceptance by the Borrowers until 21 December 2002, when it will lapse.
If accepted,  this letter and its schedules will form the agreement  between the
Borrowers and BoS for the Facility.

The definitions which shall apply to this letter are given in Schedules 4 and 7.

1.     Conditions Subsequent

       The Borrowers shall deliver to BoS the documents and evidence detailed in
       Schedule  1,  in a form  and  content  satisfactory  to BoS,  within  the
       timescales detailed therein (unless waived or extended by BoS).

2.     The Facility

       2.1    Purpose

              The Borrowers may only use the Facility for its general  corporate
              purposes  and BoS shall not be obliged to concern  itself with the
              application of any Advance.

       2.2    Interest in respect of Advances

                     2.2.1  The  period for which  each  Advance is  outstanding
                            shall be divided into  successive  Interest  Periods
                            each  of  which  will  start  on the  expiry  of the
                            previous  period  or,  in  the  case  of  the  first
                            Interest Period, on drawdown.

                     2.2.2  The Borrowers  will pay interest on each Advance for
                            each Interest Period at the annual rate which is the
                            sum of (1) the  Margin,  (2)  LIBOR  and (3) the MLA
                            Costs.

                     2.2.3  Interest  will be paid in arrears  on each  Interest
                            Payment Date.

                     2.2.4  The Borrowers may select Interest  Periods of one or
                            three  months  (subject to Clause 2.2.6 below and/or
                            as  otherwise  agreed  by BoS  acting  in  its  sole
                            discretion).
<PAGE>

                     2.2.5  If the Borrowers do not select an Interest Period by
                            11 am on the Business Day preceding its commencement
                            then subject to Clause 2.2.6  below,  that  Interest
                            Period will be three months.

                     2.2.6  No Interest Period may be selected which (1) extends
                            beyond the Final Repayment Date or (2) would require
                            the Borrowers to prepay an Advance before the end of
                            the  relevant  Interest  Period to  ensure  that the
                            Facility  reduces  in  accordance  with  Clause  2.4
                            below.

                     2.3.7  If there is a repayment,  prepayment  or recovery of
                            all or any part of an Advance other than on the last
                            day of an Interest  Period,  then the Borrowers will
                            pay BoS an amount  equal to the  amount  (if any) by
                            which the interest  which would have been payable on
                            the  amount  received  at the end of  that  Interest
                            Period exceeds the interest which, in the opinion of
                            BoS,  would  have been  payable  on a deposit in the
                            currency of the amount  received or recovered  equal
                            to the  amount  placed  by it with a  prime  bank in
                            London  for a period  from the  first  Business  Day
                            after the early payment or recovery until the end of
                            that Interest Period and the Borrowers indemnify BoS
                            against  any other  costs,  liabilities  or expenses
                            incurred  by  BoS  in  connection  with  that  early
                            payment or recovery.

         2.3      Guarantee Fees

                     The Borrowers  will pay a fee in respect of each  Guarantee
                     (other  than in respect of the  guarantee  by the Parent of
                     Borrowings due to BoS from Furniture  Builders  Limited) at
                     an  annual  rate of the  Margin  of the full  amount of the
                     Guarantee  Exposure.  The fee shall be payable quarterly in
                     advance.

         2.4      Reduction in Facility Exposure

                     2.4.1  Subject to the other  provisions of this letter,  on
                            each of the  dates  set out in  Column  1 below  the
                            Facility  Exposure shall be reduced to the level set
                            out in  Column 3 by the  amount  set out in Column 2
                            and the  Available  Facility  will be reduced by the
                            same amount.

                            1                  2                  3
                            -                  -                  -

                            31 December 2002   $3,000,000         $20,000,000
                            31 March 2003      $5,000,000         $15,000,000
                            30 June 2003       $5,000,000         $10,000,000
                            30 September 2003  $5,000,000         $5,000,000
                            31 December 2003   $5,000,000         -

                     2.4.2  The  reduction  in the  Facility  Exposure  shall be
                            achieved by either (1) the repayment of principal in
                            respect of a Guarantee (and the resultant release by
                            BoS of its  obligations  under  that  element of the
                            relevant   Guarantee)  or  (2)  the   prepayment  of
                            Advances  drawn down under the  Facility  or (3) the
                            collateralisation  of the Facility Exposure by means
                            of a payment to the Cash Collateral Account pursuant
                            to Clause 2.7 below.

         2.5      Early Reduction in Facility Exposure

                     The  Borrowers  may  reduce  the  Facility  Exposure  early
                     provided that:-

                     2.5.1  they  have  given BoS at least  two  Business  Days'
                            notice  in  writing  of their  intention  to  reduce
                            early;

                     2.5.2  where the  reduction is achieved by the repayment of
                            an Advance, the repayment is made on the last day of
                            an  Interest  Period  or it has met its  obligations
                            under Clause 2.2.7 above;
<PAGE>

                     2.5.3  any  amount  applied  in  early   reduction  of  the
                            Facility   Exposure  may  not  be   re-borrowed   or
                            re-utilised  and  the  Available  Facility  will  be
                            reduced accordingly;

                     2.5.4  any  notice  issued  to BoS  under  Clause  2.5.1 is
                            irrevocable; and

                     2.5.5  the  reduction  is  applied  against  the  next  due
                            reduction or otherwise as agreed  between the Parent
                            and BoS.

         2.6      Mandatory Reduction in Facility Exposure

                     2.6.1  The Borrowers  will reduce the whole  Facility early
                            on a Sale (or if the net sale proceeds are less than
                            total  liabilities due by the Borrowers to BoS, then
                            the Borrowers will reduce the Facility to the extent
                            of the net sale proceeds) or Listing.

                     2.6.2  The Borrowers  will reduce the Facility early on the
                            recovery  of Net  Proceeds  or Cost  Savings (to the
                            extent of any Net  Proceeds  or Cost  Savings at any
                            time  recovered)  in  accordance  with Clause  2.6.3
                            below.

                     2.6.3  All Net Proceeds or Cost Savings  shall be paid into
                            the  Proceeds  Account.  BoS shall,  on any Interest
                            Payment Date when the balance standing to the credit
                            of  the  Proceeds   Account   exceeds   $500,000  or
                            otherwise upon the occurrence of an Event of Default
                            be  entitled  to apply  the whole or any part of the
                            sums standing to the credit of the Proceeds  Account
                            in  the  name  of the  Parent  in or  towards  early
                            reduction of the Facility in accordance  with Clause
                            2.5.5.

                     2.6.4  For the  purposes  of this  Clause  2.6,  the Parent
                            shall establish the Proceeds  Account in the name of
                            the Parent  with BoS.  BoS shall  have sole  signing
                            rights to the Proceeds Account. The Parent shall not
                            be entitled at any time to withdraw or transfer  any
                            sums from the Proceeds Account except with the prior
                            consent of BoS.

                     2.6.5  The  Parent  shall not  sell,  assign,  transfer  or
                            otherwise  encumber  or  charge  all  or  any of its
                            right,  title and interest in and to the sum or sums
                            from  time to time  standing  to the  credit  of the
                            Proceeds  Account and/or any other rights in respect
                            of the Proceeds Account,  other than pursuant to the
                            BoS Documents.

                     2.6.6  The Parent irrevocably authorises BoS in the name of
                            the Parent to do all such acts and  execute all such
                            documents  which  the  Parent  itself  could  do  or
                            execute  in  relation  to the  Proceeds  Account  in
                            connection  with any of the  matters  dealt  with in
                            this Clause 2.6.

                     2.6.7  The amount  credited to the Proceeds  Account  shall
                            bear interest, from the time it is so credited until
                            the  sum  it  is  withdrawn  from  that  account  or
                            otherwise applied in accordance with this Clause 2.6
                            at the Rate and such  interest  shall be credited to
                            the  Proceeds   Account.   After  reduction  of  the
                            Facility  Exposure to nil,  BoS shall  transfer  any
                            interest,  proceeds,  benefits  or title  which  has
                            accrued under,  in or to the Proceeds  Account to an
                            account  nominated  by the parent  for that  purpose
                            (after deduction of any applicable Taxes).

         2.7      Cash Collateral Account

                     2.7.1  For the  purposes of Clauses 2.4 and 2.5, the Parent
                            shall establish the Cash  Collateral  Account in the
                            name of the  Parent  with BoS.  BoS shall  have sole
                            signing rights to the Cash Collateral  Account.  The
                            Parent shall not be entitled at any time to withdraw
                            or  transfer  any  sums  from  the  Cash  Collateral
                            Account except with the prior consent of BoS.

                     2.7.2  BoS  shall,  at any time upon the  occurrence  of an
                            Event of  Default or where a demand has been made of
                            BoS  under a  Guarantee,  be  entitled  to apply the
                            whole or any part of the sums standing to the credit
                            of the Cash  Collateral  Account  in the name of the
                            Parent in or towards  payment of any unpaid  sums at
                            any time due from the  Borrowers  to BoS  under  the
                            Facility  and/or any sums  demanded from BoS under a
                            Guarantee
<PAGE>

                            and  BoS  may  effect  such   transactions   as  are
                            appropriate  to  implement  any such payment and any
                            usual  charges or expenses  (including  any breakage
                            costs) and all applicable  Taxes in relation to such
                            transactions shall be paid by the Borrowers.

                     2.7.3  The  Parent  shall not  sell,  assign,  transfer  or
                            otherwise  encumber  or  charge  all  or  any of its
                            right,  title and interest in and to the sum or sums
                            from time to time standing to the credit of the Cash
                            Collateral   Account  and/or  any  other  rights  in
                            respect of the Cash Collateral  Account,  other than
                            pursuant to the BoS Documents.

                     2.7.4  The Parent irrevocably authorises BoS in the name of
                            the Parent to do all such acts and  execute all such
                            documents  which  the  Parent  itself  could  do  or
                            execute in relation to the Cash  Collateral  Account
                            in connection  with any of the matters dealt with in
                            this Clause 2.7.

                     2.7.5  The amount credited to the Cash  Collateral  Account
                            shall bear interest, from the time it is so credited
                            until the sum it is  withdrawn  from that account or
                            otherwise  applied in  accordance  with this  Clause
                            2.7, at the Rate and such interest shall be credited
                            to  the  Cash  Collateral  Account  and  applied  in
                            reduction of the Facility  Exposure on each Interest
                            Payment  Date.   After  reduction  of  the  Facility
                            Exposure to nil, BoS shall  transfer  any  interest,
                            proceeds, benefits or title which has accrued under,
                            in or to the Cash  Collateral  Account to an account
                            nominated  by the  Parent  for that  purpose  (after
                            deduction of any applicable Taxes).

         2.8      Counter indemnity

                     2.8.1  The  Borrowers  agree  to pay to  BoS on  demand  an
                            amount  equal to each  amount  demanded of BoS under
                            each Guarantee and agree to indemnify and undertakes
                            to keep  indemnified BoS against all costs,  losses,
                            damages,  actions,  claims, demand,  liabilities and
                            expenses of whatsoever  nature and howsoever arising
                            which BoS may incur,  suffer or sustain by reason of
                            or arising in any way whatsoever (save to the extent
                            resulting  from  its  or  its  employees  or  agents
                            negligence or wilful  default) in connection  with a
                            Guarantee  or  the  issue  of  a  Guarantee  or  any
                            payments made thereunder.

                     2.8.2  BoS  shall  at all  times  be  entitled  to make any
                            payment  under a  Guarantee  for which a prima facie
                            valid  request  or  demand  has  been  made by or on
                            behalf of a  beneficiary  under a Guarantee  without
                            further investigation or enquiry or any reference to
                            or authority from any Borrower. BoS need not concern
                            itself with the  enforceability  and/or propriety of
                            any claim  which is made in the manner  required  by
                            the Guarantee nor shall any Borrowers be entitled to
                            refuse  payment of any amount claimed from it by BoS
                            under  Clause 2.8.1 of this letter on the basis that
                            BoS was or might  have  been  entitled  to refuse to
                            make  any  payment  to  any  beneficiary  under  the
                            Guarantee.  Any  payment  by BoS to any  beneficiary
                            shall  be  accepted   by  the   parties   hereto  as
                            conclusive evidence that BoS was liable to make such
                            payment.

                     2.8.3  If a demand for payment under a Guarantee is made to
                            BoS,  BoS shall  promptly  give notice to the Parent
                            setting  out  details of the demand and shall make a
                            copy of the demand  available to it. An amount equal
                            to the  amount  demanded  of BoS  shall  be due  and
                            payable by the Borrowers to BoS in  accordance  with
                            Clause 2.

                     2.8.4  The  obligations  of  the  Borrowers  hereunder  are
                            continuing  obligations  and shall not in any way be
                            discharged or impaired by reason of:-

                            2.8.4.1 the illegality  or  unenforceability  of the
                                    obligations  hereunder   under   any   other
                                    document of any other party hereto;

                            2.8.4.2 any time or other  indulgence  which  may be
                                    granted by any beneficiary under a Guarantee
                                    to BoS or by  BoS to any Borrower  or to any
                                    other  person   from   whom   it  may   seek
                                    reimbursement in respect of any sums paid
                                    out by it  hereunder  or  in connection with
                                    a Guarantee;
<PAGE>

                            2.8.4.3 the illegality or unenforceability of or any
                                    variation of the terms of a Guarantee; or

                            2.8.4.4 any circumstance  which  would or might (but
                                    for this  provision)  constitute  a legal or
                                    equitable  discharge   or   defence  of  any
                                    Borrower.

                     2.8.5  Any rights  conferred on BoS by this letter shall be
                            in  addition  to  and  not  in  substitution  for or
                            derogation  from any other rights which BoS may from
                            time to  time  have or  seek  for  reimbursement  or
                            indemnification from any person.

                     2.8.6  BoS shall not be obliged  before taking any steps to
                            enforce  any rights,  powers or  remedies  conferred
                            upon it by this letter or by law:-

                            2.8.6.1 to take action or obtain judgement in any
                                    court against any other person from whom it
                                    may seek reimbursement in respect of sums
                                    paid out by it under a Guarantee or this
                                    letter; or

                            2.8.6.2 to make or file any claim in any bankruptcy,
                                    winding-up, liquidation or reorganisation of
                                    any Borrower or any other person; or

                            2.8.6.3 to enforce or seek to enforce any other
                                    rights which it may have against any
                                    Borrower or any other person or persons.

3.     Hedging

       3.1    The Parent,  after  consultation  with BoS,  shall enter into such
              interest rate protection agreements (with BoS Group) regarding its
              exposure to interest rates or foreign exchange rates as the Parent
              and BoS may agree from time to time. Any fee or premium payable to
              BoS or to any other  person  in  connection  with such  agreements
              shall be  payable  by the  Borrower  on demand  and the  Borrowers
              hereby indemnify BoS (and any of its subsidiaries) against all and
              any liabilities,  losses,  damages,  costs and other amounts which
              may  arise  out  of  or  in  connection  with  such   arrangements
              (including,  without limitation, the termination or closing out of
              such  arrangements)  save to the extent  resulting  from the gross
              negligence or wilful default of BoS or any of its subsidiaries.

       3.2    In  consideration  of (1) Treasury (now or in the future) entering
              into any of the agreements  contemplated  in Clause 3.1 above with
              any Borrower and (2) BoS entering into the Treasury Guarantee, the
              Borrowers shall indemnify BoS against the Indemnified  Events.  In
              addition, each Borrower:-

                     3.2.1  authorises  BoS to make any payments and comply with
                            any  demands  made  under  the  Treasury   Guarantee
                            without  further  authority  from that  Borrower and
                            agrees  that any such  payment  shall be  binding on
                            that Borrower  without further  evidence from BoS of
                            its liability to make such payment to Treasury;

                     3.2.2  undertakes  to pay to BoS on demand an amount  equal
                            to each amount demanded under the Treasury Guarantee
                            and authorises  BoS to debit any of that  Borrower's
                            accounts with such sums; and

                     3.2.3  agrees  that this  indemnity  shall be a  continuing
                            security until such time as all liabilities, claims,
                            damages, costs and expenses incurred or sustained by
                            that Borrower under this indemnity have been paid or
                            discharged in full.

4.     Default Interest

       4.1    If any  Borrower  fails to pay any sum under or in relation to the
              Facility on its due date then the  Borrowers  will pay interest on
              it until it is paid at the Default Rate.

       4.2    Default interest payable must be paid monthly in arrear and if not
              paid will itself bear interest at the Default Rate.
<PAGE>

5.     Security

       5.1    As security for the Facility and any other money owing or incurred
              to BoS by any Group Company (including contingent  liabilities and
              all amounts due to BoS in respect of payment  commitments  entered
              into by BoS on behalf of any Group  Company but not yet debited to
              that  company's  account)  the  Borrowers  will deliver or procure
              delivery of the security detailed in Schedule 1.

       5.2    The Borrowers  will grant (to the extent  legally  possible)  such
              further  security to BoS as it may  require  from time to time and
              procure  that any  subsidiary  undertaking  which is created or is
              acquired by any Group  Company  after the date of this letter will
              grant such security to BoS as it shall notify to the Borrower from
              time to  time  and all  such  further  security  will  secure  the
              Facility and any other money owing or incurred to BoS by any Group
              Company (including contingent  liabilities) provided that BoS will
              not take any security over the Group's cash accounts  required for
              operational purposes unless there has occurred an Event of Default
              and BoS requests such security in writing.

6.     Representations and Warranties

       The  Borrowers  by  signing  this  letter  make the  representations  and
       warranties  set out in Schedule 2 and repeat each of them (save for 7, 8,
       10,  11,  17 and 18) on each  Interest  Payment  Date and on each date on
       which guarantee fees are payable pursuant to Clause 2.3 of this letter.

7.     Covenants

       The Borrowers  covenant with BoS that from the date of its  acceptance of
       this  letter  until  all the  Borrower's  obligations  under it have been
       discharged:-

       7.1    General Covenants

              The Borrowers  will at all times comply and procure  compliance by
              each other Group  Company  with the general  covenants  set out in
              Schedule 3.

       7.2    Financial Covenants

              The  Borrowers  will  at  all  times  comply  with  the  financial
              covenants set out in Schedule 4.

       7.3    Financial Information Covenants

              The  Borrowers  will  at  all  times  comply  with  the  financial
              information covenants set out in Schedule 5.

8.     Default and Indemnity

       8.1    If an Event of Default  occurs  and has not been  waived by BoS in
              writing, BoS may by notice in writing to the Parent:-

                     8.1.1  cancel  any part of the  Facility  then  undrawn  or
                            unutilised; and/or

                     8.1.2  require  repayment  (immediately or otherwise as BoS
                            may require) of the Facility  together  with accrued
                            interest;

                     8.1.4  call for cash  cover in  respect  of any  Guarantee;
                            and/or

                     8.1.5  require  that  interest  and/or  guarantee  fees are
                            payable on the Facility at the Default Rate.

       8.2    The Borrowers will indemnify (and keep indemnified) BoS on written
              demand  against  any  loss  or  expense   (reasonably   incurred),
              including legal fees, which BoS sustains or incurs:-
<PAGE>

                     8.2.1  because  of a default  by any Group  Company  of any
                            obligation assumed by it under any BoS Document; or

                     8.2.2  as  a  consequence   of  any  Event  of  Default  or
                            Potential Event of Default.

9.     Taxes and Increased Cost

       9.1    All payments by a Borrower to BoS (being a Qualifying  Bank) under
              this letter shall be free and without deduction of tax unless that
              Borrower is required by law to make a payment subject to deduction
              or  withholding  of tax,  in which case the amount  payable by the
              Borrower  will  be  sufficiently  increased  to  ensure  that  BoS
              receives  and  retains a net sum equal to that which it would have
              received and retained  were no deduction or  withholding  made. If
              BoS  subsequently  receives a tax credit which is referable to the
              increased  payment and which  enhances its position,  then it will
              reimburse  that Borrower  sufficient to redress the position up to
              the amount  received so long as by so doing it does not  prejudice
              receipt or retention of the tax credit.

       9.2    If BoS incurs an Increased Cost, then the Borrowers will indemnify
              it and  will  promptly  pay  to it the  amount  BoS  certifies  as
              payable. BoS will disclose, in reasonable detail, the basis of its
              calculation but not any matter which it considers confidential.

10.    Payment, Set Off and Interest Calculations

       10.1   All payments of principal,  interest or commission will be paid to
              BoS at the Parent's branch unless BoS otherwise  directs and shall
              be in cleared US Dollar funds free of set-off or counterclaim.

       10.2   All sums of interest or commission will be calculated on the basis
              of a year of 360 days and for the  actual  number of days  elapsed
              following decree or judgement as well as before it.

       10.3   Any  determination  by BoS of any amount of  principal,  interest,
              commission or charges or an applicable interest rate shall, in the
              absence  of  manifest  error,  be  conclusive  and  binding on the
              Borrowers.

       10.4   Where the due date for  payment of any sum under any BoS  Document
              is not a Business Day then (without  affecting  subsequent payment
              dates)  actual  payment will be required on the next  Business Day
              unless that day falls in the next  calendar  month,  in which case
              payment will be on the preceding Business Day.

       10.5   The Borrowers  agree that any monies from time to time standing to
              its credit on any  account  with BoS may be  retained as cover for
              and at any time without notice to the Borrowers  applied by BoS in
              or towards  payment or  satisfaction  of any monies or liabilities
              now or from time to time due,  owing or incurred by the  Borrowers
              to BoS in whatsoever  manner,  whether  presently  payable or not,
              whether actually or  contingently,  whether solely or jointly with
              any other person and whether as principal or surety.

       10.6   If BoS  exercises any right of set-off in respect of any liability
              of the  Borrowers  and  that  liability  or any part of it is in a
              different currency from any credit balance against which BoS seeks
              to set it off, BoS may use the  currency of the credit  balance to
              purchase an amount in the  currency of the  liability  at the then
              prevailing  spot  rate of  exchange  and to pay out of the  credit
              balance  all  costs,  charges  and  expenses  incurred  by  BoS in
              connection with that purchase.

       10.7   If the  Borrowers  fail to pay any amount due to BoS in US dollars
              but makes such payment in another optional currency, the Borrowers
              shall  indemnify  BoS  against  the  full  cost  incurred  by  BoS
              (including  all costs,  charges and expenses) of  converting  that
              payment into US dollars.

11.    Illegality

       If, in the opinion of BoS, the  introduction  of any law or regulation or
       change in its  interpretation,  makes it unlawful for BoS to maintain any
       part of the Facility or carry out any of its  obligations  in relation to
       it then BoS will  serve  notice  to that  effect on the  Parent  and that
       notice will release BoS from those


<PAGE>

       obligations.  The  Borrowers  will then repay to BoS (on its demand or on
       whatever later date BoS reasonably  specifies) the Facility together with
       any other sums payable to BoS under this letter.

12.    Assignment and Transfer

       12.1   This letter is for the benefit of the  Borrowers and BoS and their
              successors and assignees and transferees of BoS.

       12.2   The  Borrowers  may not  assign  or  transfer  all or any of their
              rights, obligations or benefits under this letter.

       12.3   BoS will be entitled (after  consultation  with the Parent) to (1)
              assign,  novate or transfer and/or (2) permit a  participation  in
              all or any part of its rights and obligations under this letter to
              or by any other Qualifying Bank or Banks. The Borrowers  undertake
              to execute and to procure that each Group Company will execute all
              documents  BoS  may  reasonably  require  to  give  effect  to  an
              assignment,  novation  or  transfer.  If  BoS  does  enter  into a
              participation  arrangement,  the  Borrowers  will continue to deal
              directly with BoS as agent.

       12.4   BoS will be entitled to enter into any  sub-participation or other
              contractual  arrangement  with any person in  relation  to the BoS
              Documents   and   (subject   to  Clause  12.5  below)  to  provide
              information  in  relation  to the Group to such  persons  for such
              purpose.

       12.5   BoS will be  entitled to  disclose  to any  prospective  or actual
              assignee,  transferee or participant,  any other member of the BoS
              Group or any other  person  who enters or  proposes  to enter into
              contractual  relations  with BoS in relation to the BoS  Documents
              confidential  information  concerning  each Group  Company and its
              financial  condition and any other  information which may be given
              to BoS in relation  to this  letter,  provided  that the person to
              whom such  information is disclosed  undertakes to BoS to maintain
              the confidentiality of such information.

13.    Notices

       Unless  otherwise   provided  in  this  letter,   all  notices  or  other
       communications to or between the parties will be in writing and:-

       13.1   will  be by  first-class  pre-paid  post  or by fax  transmission,
              authenticated to the satisfaction of BoS and if by letter, will be
              deemed to have  been  received  forty-eight  hours  after  posting
              (unless hand delivered and then at the time of delivery) and if by
              fax, when sent (provided a transmission report is received);

       13.2   in order to prove that a notice or demand has been made,  BoS need
              only  establish  that the notice or demand was properly  addressed
              and posted or transmitted;

       13.3   if given to BoS,  it will be given at the  address  at the head of
              this  letter  or at any  other  address  in the UK  which  BoS may
              designate at any time by notice to the Parent;

       13.4   if given to any  Borrower,  it will be deemed to be duly  given if
              given at the address at the front of this letter;

       13.5   BoS  may  rely  upon  any  communication  by  telephone  or fax or
              purporting  to be on behalf of any Borrower by anyone  notified to
              BoS as being authorised  without enquiry by BoS as to authority or
              identity.  The  Borrowers  agree  to  indemnify  BoS  against  any
              liability incurred or sustained by BoS as a result.

14.    Press Release

       The Borrowers and BoS shall agree the terms of any public announcement or
       press release (other than documents that any Borrower is required to file
       on any public register) concerning the terms of this letter.



<PAGE>


15.    Obligations

       The  obligations  of each  Borrower in relation to the Facility are joint
       and several.

16.    Waivers and Severability

       16.1   No failure or delay by BoS in exercising any right or remedy under
              any BoS  Document  shall  operate  as a  waiver,  and no single or
              partial exercise shall prevent further  exercise,  of any right or
              remedy.

       16.2   If any part of this letter is not valid or  enforceable  then that
              shall not affect any other part.

       16.3   The  Schedules  referred to in this letter shall form part of this
              letter.

17.    Fees and Expenses

       17.1   The Borrowers will pay to BoS:-

              17.1.1 a  restructuring  fee  of  (pound)180,000  payable  on  the
                     earlier of (1) any sale of all or substantially  all of the
                     shares or assets held by LPAL or BCM or their  Subsidiaries
                     to the extent of the balance due of the  restructuring  fee
                     or (2) in instalments of  (pound)60,000  on each of 30 June
                     2003,  30  September  2003 and 31  December  2003 and which
                     shall be debited to the current  account of the Parent with
                     BoS;

              17.1.2 accrued  management  fees of  (pound)60,000  which shall be
                     payable  within 10 Business Days of the date of this letter
                     and which  shall be debited  to the  credit  account of the
                     Parent with BoS;

              17.1.3 a management fee of (pound)10,000 per month commencing on 1
                     March 2003  payable (to the extent such fee has accrued) on
                     (1) any sale of all or  substantially  all of the shares or
                     assets  held by LPAL or BCM or their  Subsidiaries  and (2)
                     the Final  Repayment Date and which shall be debited to the
                     current account of the Parent with BoS;

              17.1.3 a facility fee calculated as the average Facility  Exposure
                     for each  quarter  ending  on the  quarter  date  listed in
                     Column 1 multiplied  by the  Facility Fee Margin  listed in
                     Column 2 below.  Such  facility  fee  shall be  payable  in
                     arrears on the  relevant  quarter date and shall be debited
                     to the current account of the Parent with BoS;


                        Column 1                                  Column 2
                        --------                                  --------

                        31 December 2002                          0.5% per annum
                        31 March 2003                             1.0% per annum
                        30 June 2003                              2.0% per annum
                        30 September 2003                         2.5% per annum
                        31 December 2003                          2.5% per annum


              17.1.4 external legal fees for the  preparation and negotiation of
                     this letter, the approval of documents  presented to BoS in
                     terms of Schedule 1 and for the  instruction or preparation
                     of the Security Documents and which shall be debited to the
                     current account of the Parent with BoS.

       17.2   The  Borrowers  will pay or reimburse to BoS (on a full  indemnity
              basis) all reasonable legal, accountancy, valuation, due diligence
              and other fees,  costs and  expenses or tax charged to or incurred
              by BoS in connection with BoS Documents  (including the amendment,
              waiver, enforcement or preservation of the BoS rights) on demand.



<PAGE>


18.    Special Inter-Borrower Provisions

       18.1   Borrowers Acknowledgements and Agreements

              18.1.1 Each Borrower  acknowledges  that it will enjoy significant
                     benefits from the business conducted by the other Borrowers
                     because of, among other things, their combined abilities to
                     bargain with other  persons  including  without  limitation
                     their  ability to receive the Facility on the terms granted
                     by  BoS  which  would  not  have  been   available  to  any
                     individual   Borrower  acting  alone.   Each  Borrower  has
                     determined  that it is in its best  interest to procure the
                     Facility which the Borrowers  will utilise as  contemplated
                     by this letter.

              18.1.2 BoS has advised the Borrowers that it is unwilling to enter
                     into this letter and make  available the Facility  extended
                     hereby to any Borrower unless each Borrower  agrees,  among
                     other things,  to be jointly and  severally  liable for the
                     due and  proper  payment of the  obligations  of each other
                     Borrower  under the Facility.  Each Borrower has determined
                     that  it is in its  best  interest  and in  pursuit  of its
                     purposes that it so induce BoS to extend credit pursuant to
                     the  Facility  and the  documents  executed  in  connection
                     therewith (i) because of the  desirability to each Borrower
                     of the  Facility,  the  interest  rates  and the  modes  of
                     borrowing available thereunder,  (ii) because each Borrower
                     may engage in transactions jointly with other Borrowers and
                     (iii) because each Borrower may require, from time to time,
                     access to funds under the  Facility  for the  purposes  set
                     forth in this letter.

              18.1.3 Each  Borrower  has  determined  that it has and will have,
                     access to adequate  capital for the conduct of its business
                     and the ability to pay its debts from time to time incurred
                     in  connection  therewith as such debts mature and that the
                     value of the benefits to be derived by such  Borrower  from
                     the access to funds under this letter  (including,  without
                     limitation,  the  inter-Borrower  arrangement  set forth in
                     this  Clause  18.1)  is   reasonably   equivalent   to  the
                     obligations undertaken pursuant hereto.

              18.1.4 The  Parent  (on behalf of each  Borrower)  shall  maintain
                     records  specifying  (a) all  obligations  incurred by each
                     Borrower, (b) the date of such incurrence, (c) the date and
                     amount of any payments made in respect of such  obligations
                     and (d) all  inter-Borrower  obligations  pursuant  to this
                     Clause  18. The Parent  shall make  copies of such  records
                     available to the BoS, upon request.

       18.2   To the extent that  applicable law otherwise would render the full
              amount  of the  joint  and  several  obligations  of any  Borrower
              hereunder and under any other documents  invalid or unenforceable,
              such  Borrower's   obligations   hereunder  and  under  any  other
              documents  shall be limited to the maximum  amount  which does not
              result in such invalidity or unenforceability,  provided, however,
              that each  Borrower's  obligations  hereunder  and under the other
              documents  shall be  presumptively  valid and enforceable to their
              fullest extent in accordance with the terms hereof or thereof,  as
              if this clause 18.2 were not a part of this Agreement.

       18.3   Authorisation of the Parent by Borrowers

              18.3.1 Each of the Borrowers  hereby  irrevocably  authorises  the
                     Parent  to give  notices,  make  requests,  make  payments,
                     receive  payments  and notices,  give  receipts and execute
                     agreements,  make  agreements  or  take  any  other  action
                     whatever on behalf of such Borrower  under and with respect
                     to this letter or the Facility and each  Borrower  shall be
                     bound  thereby.  This  authorisation  is  coupled  with  an
                     interest and shall be irrevocable,  and BoS may rely on any
                     notice,  request,  information  supplied  by Parent,  every
                     document  executed by Parent every agreement made by Parent
                     or other action taken by Parent in respect of the Borrowers
                     or any thereof as if the same were supplied,  made or taken
                     by any or all Borrowers. Without limiting the generality of
                     the foregoing, the failure of one or more Borrowers to join
                     in the  execution  of any  writing in  connection  herewith
                     shall not, unless the context clearly requires, relieve any
                     such Borrower from obligations in respect of such writing.
<PAGE>

              18.3.2 The  Borrowers   acknowledge   that  the  credit   provided
                     hereunder  is on terms more  favourable  than any  Borrower
                     acting alone would receive and that each Borrower  benefits
                     directly and indirectly from all Advances  hereunder.  Each
                     of the other  Borrowers,  shall be  jointly  and  severally
                     liable for all  obligations  regardless  of which  Borrower
                     requested  (or  received  the  proceeds  of)  a  particular
                     Advance.

19.    Counterparts

       This  letter may be executed  in any number of  counterparts  and all the
       counterparts  when executed and taken together  shall  constitute one and
       the same letter.

20.    Additional Borrowers

       For the  purposes  of the entry of  London  Pacific  Technologies,  Inc.,
       London Pacific Advisors,  Inc. and London Pacific Advisory Services, Inc.
       to accede to this letter as Borrowers,  the Parent shall deliver or cause
       to be  delivered  to BoS an  accession  agreement  duly  executed  by the
       parties  thereto in form and  context  satisfactory  to BoS.  This letter
       shall thereafter be read and construed as if each person which is a party
       to such  accession  agreement as a proposed  additional  borrower  were a
       party to this letter having the same rights and obligations of a Borrower
       and all  references  to the  "Borrowers"  hereunder  shall  be  construed
       accordingly.

21.    Law

       This letter will be governed by and construed according to English law.

22.    Jurisdiction

       22.1   Each of the parties hereto  irrevocably  agrees for the benefit of
              BoS that the courts of England shall have jurisdiction to hear and
              determine  any suit,  action  or  proceeding,  and to  settle  any
              disputes,  which  may  arise  out of or in  connection  with  this
              Agreement  (respectively  "Proceedings"  and "Disputes")  and, for
              such purposes,  irrevocably  submits to the  jurisdiction  of such
              courts.

       22.2   Each of the  Borrowers  irrevocably  agrees that the courts of the
              State of New York and the courts of the United  States of America,
              in each  case  sitting  in the  County  of New  York,  shall  have
              jurisdiction  to hear and determine any  Proceedings and to settle
              any Disputes and, for such  purposes,  irrevocably  submits to the
              jurisdiction of such courts.

       22.3   Each of the Borrowers  irrevocably  waives any objection  which it
              might now or  hereafter  have to the courts  referred to in Clause
              22.1 and  Clause  22.2  being  nominated  as the forum to hear and
              determine  any  Proceedings  and to settle any Disputes and agrees
              not  to  claim  that  any  such  court  is  not  a  convenient  or
              appropriate forum.

       22.4   The Parent and each Borrower  agrees that the process by which any
              Proceedings  are begun may be served on it by being  delivered (i)
              in  connection  with any  Proceedings  in England,  to the process
              agent to be confirmed in accordance with paragraph 4.4 of Schedule
              1 (ii) in connection with any Proceedings in New York, the process
              agent to be confirmed in accordance with paragraph 4.4 of Schedule
              1. If the  appointment of either of the persons  mentioned in this
              Clause 22.4  ceases to be  effective  in respect of any  Borrower,
              such  Borrower  shall  immediately  appoint  a  further  person in
              England  or,  as the case may be,  New York to accept  service  of
              process on its behalf in England  or, as the case may be, New York
              and,  failing  such  appointment  within  15  days,  BoS  shall be
              entitled to appoint such a person by notice to the Parent. Nothing
              contained  herein shall  affect the right to serve  process in any
              other manner permitted by law.
<PAGE>

       22.5   The submission to the  jurisdiction  of the courts  referred to in
              Clause 22.1 and Clause 22.2 shall not (and shall not be  construed
              so as to) limit the right of BoS to take  Proceedings  against any
              Borrower in any other court of  competent  jurisdiction  nor shall
              the  taking  of  Proceedings  in  any  one or  more  jurisdictions
              preclude  the  taking of  Proceedings  in any  other  jurisdiction
              (whether  concurrently  or not) if and to the extent  permitted by
              applicable law.


Yours faithfully


.....................................................
for and on behalf of
THE GOVERNOR AND COMPANY
OF THE BANK OF SCOTLAND

Agreed and accepted on behalf of LONDON PACIFIC GROUP LIMITED

By ......................................................... Director

............................................................. Director/Secretary

Date:


Executed as a Deed by
BERKELEY INTERNATIONAL CAPITAL CORPORATION acting by in the presence of this
witness:

................................................. Signature

................................................. Name

................................................. Address

.................................................


Executed as a Deed by BERKELEY INTERNATIONAL CAPITAL LIMITED acting by in the
presence of this witness:

................................................. Signature

................................................. Name

................................................. Address

.................................................


Executed as a Deed by NORTH AMERICAN FIDUCIARY SERVICES, INC acting by in the
presence of this witness:

................................................. Signature
<PAGE>

................................................. Name

................................................. Address

.................................................







Executed as a Deed by BERKELEY (USA) HOLDINGS LIMITED acting by in the presence
of this witness:

................................................. Signature

................................................. Name

................................................. Address

.................................................


Executed as a Deed by BERKELEY CAPITAL MANAGEMENT acting by in the presence of
this witness:

................................................. Signature

................................................. Name

................................................. Address

.................................................


Executed as a Deed by BERKELEY INSTITUTIONAL  INVESTMENT,  INC. acting by in the
presence of this witness:

................................................. Signature

................................................. Name

................................................. Address

.................................................

<PAGE>


IMPORTANT NOTICE: As with any legally binding agreement, we recommend that you
consult your solicitor or other independent legal adviser before accepting this
letter.


<PAGE>



                                   SCHEDULE 1

                              CONDITIONS SUBSEQUENT



1.     Security

       On or prior to 7 February 2003:-

       1.1    a  charge  over  all  securities  held by  Berkeley  International
              Capital Limited.

       1.2    accession  to  this  agreement  as  Borrowers  by  London  Pacific
              Advisors,  Inc., London Pacific Advisory Services, Inc. and London
              Pacific  Technologies,  Inc.  and  charges  over all  Intellectual
              Property Rights held by London Pacific Advisors, Inc..

       1.3    a pledge over the shares in Berkeley Capital Management and London
              Pacific Advisors, Inc.

       1.4    a pledge of Berkeley International Capital Limited's 8% preference
              shareholding in Nazareth International.

2.     Warrants

       On or prior to 7 February 2003:-

       Warrants in favour of BoS or one of its subsidiaries to acquire 3% of the
       equity share capital of the Parent.

3.     Secretarial

       To be  delivered  within 10 Business  Days of the date of the  Borrowers'
       execution of this letter:-

       3.1    A Certified Copy of the constitutive documents of each Borrower.

       3.2    A  Certified  Copy  of the  board  resolutions  of  each  Borrower
              approving  the  execution,   delivery  and   performance  of  this
              Agreement.

       3.3    A Secretary's Certificate from each Borrower.

       3.4    Evidence of the  process  agent that has agreed to act as agent of
              each  Borrower  for the  service of process in England  and of the
              process  agent has agreed to act as agent of each Borrower for the
              service of process in New York.

       3.5    The information and evidence in respect of the Borrowers  required
              by BoS to comply with its anti money laundering procedures.

4.     Legal Opinions

       To be delivered concurrently with each relevant document (or as otherwise
       agreed with BoS):-

       An opinion by the relevant  counsel to BoS relating to the due  execution
       by each non UK Group Company of this letter and any Security Document.



<PAGE>



                                   SCHEDULE 2

                         REPRESENTATIONS AND WARRANTIES

Each Borrower represents and warrants that:-

1.     each Group Company is duly  incorporated  and validly  existing under the
       laws of the jurisdiction of its incorporation;

2.     no Group Company has any Borrowings (other than Permitted Borrowings) and
       no Security Right (other than a Permitted Security Right) exists over the
       property or assets of any of them;

3.     no Event of Default nor  Potential  Event of Default has  occurred and is
       continuing unwaived;

4.     each Borrower has power to enter into and comply with its  obligations in
       terms of the BoS Documents;

5.     everything has been done (including  obtaining any necessary consents) in
       order (1) for each Borrower to comply with its obligations  under the BoS
       Documents and (2) to ensure that those obligations are legally binding;

6.     execution of and  compliance  with the BoS  Documents  does not cause any
       Borrower to breach:-

       (a)    any law,  regulation,  judicial or  official  order to which it is
              subject;

       (b)    its constitutive documents; or

       (c)    any letter,  undertaking  or restriction to which it is a party or
              subject;

       and will not result in the imposition of any Security Right (other than a
       Permitted Security Right) on any of its assets;

7.     each  statement  of fact  contained in the  Business  Plan is  materially
       correct  and,  so far as the  Borrowers  are  aware,  there  are no other
       matters  concerning any Group Company not already disclosed in writing to
       and  accepted by BoS which would  materially  qualify or  contradict  the
       Business Plan;

8.     all statements of opinion in the Business Plan were, when made,  given in
       good  faith  after  careful  consideration  and are  still  honestly  and
       reasonably held; all forecasts and projections  contained in the Business
       Plan were prepared in good faith, after careful  consideration and on the
       basis  of  reasonable  assumptions  and the  Borrowers  are not  aware of
       anything which might affect their accuracy;

9.     save as disclosed to BoS in compliance  with Clause 2.2 of Schedule 3, no
       Material  Litigation is current,  pending or threatened against any Group
       Company or its assets;

10.    the copies of all Certified Copy documents and other documents  delivered
       to BoS are true, accurate and complete in all material respects;

11.    the most recent  Financial  Statements  of the Group  delivered to BoS in
       terms of Schedule 5 were prepared in  accordance  with US GAAP and give a
       true and fair view of the financial  condition of the Group at the end of
       the relevant period and there has been no material  adverse change in the
       financial condition of the Group since the date of those statements;

12.    each  Borrower  (other  than the  Parent)  is a wholly  owned  (direct or
       indirect) subsidiary of the Parent;

13.    each  Group   Company   holds  all  licences   and  consents   (including
       Environmental Licences) necessary for the ownership, occupation or use of
       its  property  and  which  allow it to  comply  with the terms of the BoS
       Documents  and to conduct its  business  and has complied in all material
       respects with those licences and consents and with Environmental Law;

14.    no  Dangerous  Substance  is present  on, in,  under or  adjacent  to any
       property owned or occupied by a Group Company or has been used,  disposed
       of or  released  at or from any  property  owned or  occupied


<PAGE>

       by a Group Company or (to the best of the Borrowers'  knowledge) from any
       adjoining  property,  which,  in  either  case,  is likely to result in a
       liability  which,  in the opinion of BoS,  would have a Material  Adverse
       Effect;

15.    all acts,  conditions  and  things  required  to be done,  fulfilled  and
       performed in order (a) to enable it lawfully to enter into,  exercise its
       rights under and perform and comply with the obligations  expressed to be
       assumed by it in this letter and any guarantee of the  obligations of the
       Borrowers  hereunder  to  which  it is a party,  (b) to  ensure  that the
       obligations  expressed  to be assumed  by it in this  letter and any such
       guarantee are legal, valid,  binding and enforceable and (c) to make this
       letter and any such guarantee  admissible in evidence in its jurisdiction
       of incorporation have been done, fulfilled and performed;

16.    under the laws of its  jurisdiction of incorporation in force at the date
       hereof,  the claims of BoS against it under this letter and any guarantee
       of the  obligations  of the Borrowers  will rank at least pari passu with
       the claims of all its other unsecured and  unsubordinated  creditors save
       those whose claims are preferred  solely by any  bankruptcy,  insolvency,
       liquidation or other similar laws of general application;

17.    (save in respect of any filing any  Borrower  is obliged to make with the
       Securities  and  Exchange  Commission  and  with the  Financial  Services
       Authority)  under the laws of its  jurisdiction of incorporation in force
       at the date  hereof,  it is not  necessary  that  this  letter  be filed,
       recorded  or  enrolled  with  any  court  or  other   authority  in  such
       jurisdiction or that any stamp, registration or similar tax be paid on or
       in relation to this letter;

18.    under the laws of its  jurisdiction of incorporation in force at the date
       hereof, it will not be required to make any deduction or withholding from
       any payment it may make hereunder.

<PAGE>



                                   SCHEDULE 3

                                GENERAL COVENANTS

1.     Each Borrower shall, save with the prior written consent of BoS:-

       1.1    ensure that its  obligations  in respect of the  Facility  and the
              obligations  of itself  and each  other  Group  Company  under the
              Security Documents at all times rank ahead of all other Borrowings
              of each Group Company unless statutorily preferred;

       1.2    notify BoS of any Event of Default or  Potential  Event of Default
              immediately upon becoming aware of it, at the same time describing
              the steps (if any) being taken to nullify or mitigate its effects.

2.     Each  Borrower  shall,  and shall  procure that each other Group  Company
       shall, unless it has a prior written waiver from BoS:-

       2.1    effect and maintain (with BoS interest  noted on them)  sufficient
              and  appropriate  policies of insurance of its business and assets
              and supply copies or evidence of them on written demand by BoS;

       2.2    advise BoS promptly of Material Litigation;

       2.3    take  whatever  steps  and  execute  whatever  documents  BoS  may
              reasonably  require  in  order  to  give  effect  to the  Security
              Documents;

       2.4    have and maintain all licences and authorisations  necessary under
              any law or regulation affecting the conduct of its business;

       2.5    comply with all Statutory Controls and promptly give to BoS a copy
              of any notice concerning compliance with them;

       2.6    preserve  its   Intellectual   Property  Rights  and  observe  all
              covenants and stipulations affecting them;

       2.7    at the  Borrowers'  expense,  permit BoS to obtain  valuations  of
              whatever  Group  assets  which BoS may,  at any  time,  reasonably
              require;

       2.8    on  receiving  the same,  notify BoS of any  actual or  threatened
              claim against any Group Company in respect of an alleged breach of
              Environmental  Law or Remedial  Action or liability under such law
              which could, if  well-founded,  (1) have a Material Adverse Effect
              or (2)  constitute  a material  liability  of that  Group  Company
              (which shall be judged solely by BoS);

       2.9    indemnify BoS, any receiver  appointed by BoS and their respective
              officers,  employees  and agents  against  all costs and  expenses
              suffered  or  incurred  by them which arise as a result of (1) any
              actual or threatened  breach of Environmental  Law, (2) any actual
              or threatened release of or exposure to a Dangerous  Substance on,
              at or from the premises or  operations of any Group Company or (3)
              any actual or  threatened  claim  referred  to in Clause 2.9 above
              whether such claim has a Material Adverse Effect or not;

       2.10   where harm in terms of the  Environmental  Protection Act 1990 (as
              amended  by the  Environment  Act  1995)  has been  caused  to any
              property belonging to any Group Company over which BoS has or will
              have a security interest pursuant to a Security  Document,  ensure
              that none of the Group  Companies  is held  liable for the harm or
              the  Remedial  Action  associated  with  such  harm and is not the
              "appropriate  person"  in  terms  of that  Act who has  caused  or
              knowingly  permitted that harm or  contamination  of land to occur
              and be aware both of the identity of the appropriate person and of
              that person's current financial condition.
<PAGE>

3.     Each Borrower  shall not, and shall procure that each other Group Company
       shall not, save with the prior written consent of BoS:-

       3.1    grant or  permit  to  subsist  any  Security  Right  other  than a
              Permitted Security Right;

       3.2    incur or  contract  to incur or permit to subsist  any  Borrowings
              other than Permitted Borrowings;

       3.3    dispose  of  or  part  with   control  of  (whether  by  a  single
              transaction or a series of transactions)  any asset or undertaking
              (other than a Permitted Disposal);

       3.4    carry on any business  other than that  undertaken  at the date of
              acceptance of this letter;

       3.5    lend or  give  credit  to or  indemnify  or  guarantee  any  other
              person(s)  unless it is (1) to or on account of the obligations of
              another Group Company which has granted Full Group  Security,  (2)
              in the  ordinary  course of trade or (3)  employee  loans of up to
              (pound)20,000 in aggregate;

       3.6    join any  partnership  or joint  venture  with any other person or
              amalgamate  with any other person (other than as part of a solvent
              reconstruction with the prior written consent of BoS);

       3.7    alter the  accounting  principles  and  practices  applied  in its
              Financial  Statements  (unless  to  comply  with US GAAP or on the
              advice of its auditors);

       3.8    alter its accounting reference date;

       3.9    enter an arrangement for finance not shown in its balance sheet as
              Borrowings;

       3.10   factor or discount its debts;

       3.11   allow any dormant company to undertake any significant  accounting
              transaction or otherwise  commence trading or to acquire or assume
              any rights or liabilities  without first having granted Full Group
              Security.

4.     The  Parent  covenants  that it shall  keep  BoS  fully  informed  of any
       prospective  sale of FBL (where  either the shares  held by the Parent in
       FBL are sold or  substantially  all of the  assets  of FBL are  sold) and
       shall  promptly  ensure  that Net  Proceeds  arising  from  such sale are
       promptly applied in reduction of the Facility Exposure.




<PAGE>



                                   SCHEDULE 4

                               FINANCIAL COVENANTS

1.     The Borrowers covenant with BoS as follows:-

       1.1    Core Operating Profit

       Core Operating  Profit shall not be more than 15% adverse variance of the
       forecast identified in the Business Plan.

       1.2    Cash Balances

       Cash Balances shall not be less than 85% of the amounts identified in the
       Business Plan.

2.     The  financial  covenants  shall be tested on a  quarterly  basis (and in
       respect of the Core Operating Profit Covenant, by reference to the period
       commencing  1  October  2002) in each  case by  reference  to the  latest
       financial  statements  of the  Parent or, if more  recent,  to the latest
       management  accounts of the Group,  provided  that,  where any  financial
       covenant is tested by reference to management accounts it shall be tested
       again by reference to financial  statements  when the relevant  financial
       statement become available.

3.     For the purposes of this Schedule 4:-

       "Core Operating  Profit" means, for any specified  period,  the operating
       profit  of the  consolidated  Group,  excluding  that  of  LPAL  and  its
       subsidiaries,  and excluding interest, income, interest expense, realised
       and unrealised  investment  gains and losses,  goodwill  amortisation and
       write-offs,  income taxes,  the loss on disposal of London Pacific Life &
       Annuity  Company,  fees  and  expenses  owed  or  paid  to BoS  including
       management fees, restructuring fees, facility fees, guarantee fees, legal
       fees  (including  legal fees  incurred in  relation  to this  Agreement),
       accountancy  fees,  valuation  fees,  due diligence  fees and other fees,
       costs and  expenses),  and amounts paid on behalf of  Furniture  Builders
       Limited  ("FBL")  and  its   Subsidiaries   relating  to  FBL's  and  its
       Subsidiaries borrowings from BoS (including principal payments, interest,
       facility fees and other fees, costs and expenses).

       "Cash  Balances"  means  the  cash  balances  of the  consolidated  Group
       excluding that of LPAL and its Subsidiaries,  A.C.O.T Trustee Limited and
       the London Pacific Group 1990 Employee Share Option Trust,  and excluding
       London  Pacific  Securities,  Inc.,  cash  that  is  restricted  due to a
       regulatory capital  requirements.  The Cash Balances will be adjusted for
       the add back of  interest  paid to BoS in excess of that  included in the
       Business Plan,  principal  payments to BoS, fees and expenses paid to BoS
       (including management fees,  restructuring fees, facility fees, guarantee
       fees,  legal fees  (including  legal fees  incurred  in  relation to this
       Agreement),  accountancy  fees,  valuation  fees,  due diligence fees and
       other fees,  costs and  expenses),  and amounts paid on behalf of FBL and
       its  Subsidiaries  relating  to  their  borrowings  from  BoS  (including
       principal  payments,  interest,  facility fees and other fees,  costs and
       expenses).

4.     If the  Borrowers  breach  the  terms of any of the  financial  covenants
       specified  above,  without  prejudice  to  any  of its  other  rights  or
       remedies, BoS shall be entitled to:-

       4.1    initiate an  investigation  and instruct  any report  (accounting,
              legal and  valuation or  otherwise) on the business and affairs of
              any Borrower or any other Group Company which BoS deems  necessary
              to  ascertain  the  financial  position  of the  Group,  all costs
              incurred by BoS in so doing being payable by the Borrowers; and/or

       4.2    increase the Margin by one per cent (1%).



<PAGE>



                                   SCHEDULE 5

                         financial information COVENANTS

The Parent covenants that it will supply to BoS:-

1.     within  120 days after the end of each  financial  year of the Parent two
       copies of its Financial Statements;

2.     within 30 days after the end of each month in each  financial year of the
       Parent, a management  information pack (including the management accounts
       and a profit and loss account, balance sheet and cash flow statements) on
       a  consolidated  basis for the Group and  showing a  comparison  with the
       Business  Plan together  with  commentary by the finance  director on all
       material aspects of those management accounts;

3.     at the same time as it  delivers  the  Financial  Statements  and on each
       testing date of the financial  covenants a certificate of compliance with
       the financial covenants set out in Schedule 4 signed by a director of the
       Parent,  setting out in reasonable detail supporting  computations and in
       form and content acceptable to BoS;

4.     from time to time,  promptly  after filing of the same,  provide the Bank
       with a copy of the form 10-K filed by the Parent with the  Securities and
       Exchange Commission of the United States.

5.     such further  financial  information  about the  business  and  financial
       condition of the Group as BoS may from time to time reasonably require.

The Parent also covenants that it will identify from any  consolidated  accounts
prepared  for itself  and its  Subsidiaries  the  financial  performance  of any
undertaking included in those accounts as a subsidiary undertaking (which is not
a  Subsidiary)  and  will  provide  details  of  all  financing  agreements  and
arrangements  to which any Group  Company is a party  which need not be shown in
the Financial Statements of the Parent.



<PAGE>



                                   SCHEDULE 6

                                events of default

1.     Any  Borrower  fails to pay any sum due under a BoS  Document  on its due
       date,  other than as a result of the failure of the  appropriate  payment
       transmission system which is not within the Borrower's control;

2.     any  written  information  or  projection  given  or any  representation,
       warranty or  statement  made or repeated by or on behalf of any  Borrower
       under the BoS Documents (whether before or after the date of this letter)
       is  incorrect,  inaccurate,   incomplete  or,  in  the  opinion  of  BoS,
       misleading in any material respect and, if the relevant circumstances are
       capable of remedy,  those  circumstances  are not  remedied  within seven
       days;

3.     any  Borrowings  in excess of $50,000 of any Group  Company  are not paid
       when due for payment  (whether  because of  acceleration or otherwise) or
       within any originally permitted period of grace or any creditor of all or
       any  of  the  Group  Companies  becomes  entitled  to  declare  any  such
       borrowings due and payable prior to their stated maturity;

4.     Any  Borrower  fails to comply  with the terms of Schedule 4 or any Group
       Company fails to deliver the documents and evidence  listed in Schedule 1
       within the timescales therein or fails to comply with the terms of any of
       Clauses 3.1, 3.2, 3.3, 3.5, 3.11 or 4 of Schedule 3;

5.     any  Borrower  fails to comply with any other  covenant,  undertaking  or
       obligation given or owed by it under a BoS Document which is not remedied
       to the  satisfaction of BoS within fourteen days after the first of (1) a
       Borrower  being aware of the failure or (2) notice by BoS calling for its
       remedy (should BoS reasonably consider it to be remediable);

6.     any Group  Company  ceases or threatens to cease to carry on its business
       or a significant  part of it (unless as part of a solvent  reconstruction
       approved by BoS) or suspends or threatens to suspend payment of its debts
       or is unable or is  deemed  to be  unable  to pay its  debts  within  the
       meaning of Section 123 (1) of the Insolvency Act 1986;

7.     a proposal is made or a nominee or  supervisor is appointed for any Group
       Company for a composition in  satisfaction of its debt or for a scheme of
       arrangement of its affairs or other  arrangement or any  proceedings  for
       the benefit of its creditors are commenced  under any law,  regulation or
       procedure relating to the reconstruction or readjustment of debt;

8.     a petition is made for an  administration  order under the Insolvency Act
       1986 with respect to any Group Company;

9.     any  steps  are  taken by a Group  Company  (without  BoS  prior  written
       consent) or any other person (unless in the case of a person other than a
       Group  Company  those  steps  are  reasonably  considered  by  BoS  to be
       frivolous or  vexatious)  to wind up or dissolve any Group  Company or to
       appoint a  liquidator,  trustee,  receiver,  administrative  receiver  or
       similar  officer to any Group Company or any part of its  undertaking  or
       assets;

10.    any  legal  process  (not  being  reasonably  considered  by  BoS  to  be
       defensible or vexatious,  in good faith and where the total  liability of
       the Borrowers could reasonably be expected to exceed $200,000) is levied,
       enforced  or sued  against a Group  Company  or its  assets or any person
       validly  takes  possession  of any of the  property  or assets of a Group
       Company or steps are taken by any person to enforce  any  Security  Right
       against any of the property or assets of a Group Company;

11.    any event occurs or  proceedings  are taken in respect of a Group Company
       in any jurisdiction to which it is subject which has an effect equivalent
       or similar to any of the events  mentioned  in  paragraphs  6 to 10 above
       (inclusive);

12.    any part of a BoS Document  ceases to be legal or  effective  (or a Group
       Company so alleges) or any consent  required to enable a Group Company to
       perform its obligations under a BoS Document ceases to have effect;
<PAGE>

13.    notice of  withdrawal  or  discontinuance  of any  guarantee  or security
       provided by any third party  (including  any Group  Company) is served on
       BoS and a  replacement  guarantor  suitable to BoS cannot be found within
       seven days of receipt of such notice;

14.    control of any Group  Company  passes to any  person or persons  (whether
       acting  individually or in concert) who is or are not a shareholder in it
       immediately  after the date of this  letter  without  the  prior  written
       consent of BoS;

15.    any licence,  authority,  permit, consent, agreement or contract which is
       material  to the  business  from  time to time of any  Group  Company  is
       terminated, withheld or modified which in the opinion of BoS, will have a
       Material Adverse Effect;

16.    in the  reasonable  opinion  of BoS at any  time  after  the date of this
       letter:-

       16.1   there is a risk of material  liability to BoS under  Environmental
              Law or because it has taken  security  (direct or third party) for
              the Facility; or

       16.2   the value of any asset of any Group  Company may be  diminished in
              any material way because of Environmental Law or any Environmental
              Condition; or

       16.3   any Group  Company  does not comply  with  regulations  or the law
              applicable to its business or with Environmental Law or Licence(s)
              which failure to comply will have a Material Adverse Effect;

17.    the Financial  Statements of any Borrower are qualified (except where the
       qualification  is of a  technical  nature  and the  remedy for the matter
       giving rise to the qualification  would have no effect on the results for
       the period to which the Financial  Statements  relate or on the financial
       position  of the  Group  as at the end of that  period)  or  there is any
       material adverse change in the financial condition of the Group;

18.    any  other  circumstance  or event  occurs or  arises  which  will have a
       Material Adverse Effect.



<PAGE>



                                   SCHEDULE 7

                         DEFINITIONS AND INTERPRETATION

"Advance" means an advance under the Facility.

"Available  Facility"  means  the  amount of the  Facility  at any time less the
Facility Exposure.

"BCM" means Berkeley Capital Management.

"Borrowings" means (without double counting):-

1.     money borrowed or raised and includes capitalised interest;

2.     any liability under any bond,  note,  debenture,  loan stock,  redeemable
       preference share capital or other instrument or security;

3.     any  liability  for  acceptance  or  documentary  credits  or  discounted
       instruments;

4.     any liability for the acquisition  cost of assets or services  payable on
       deferred  payment  terms  where the period of  deferment  is more than 90
       days;

5.     any liability under debt purchase,  factoring and similar  agreements and
       capital amounts owing under finance leases,  hire purchase or conditional
       sale agreements or arrangements; and

6.     any  liability   under  any  guarantee  or  indemnity   (except   product
       warranties).

"BoS" means The Governor and Company of the Bank of Scotland and its successors,
assignees and transferees.

"BoS Documents"  means this letter,  the Security  Documents,  any agreement for
working capital and all documents supplemental to any of them.

"BoS Group" means BoS, any  Subsidiary of it, any holding  company of it and any
Subsidiary of its holding company.

"Business Day" means a day when the branch of BoS at which the Parent's  account
is located is open for business.

"Business Plan" means the business plan (including any schedules and appendices)
prepared by the Parent  dated 7 November  2002 as amended from time to time with
the prior written consent of BoS and initialled for  identification  purposes by
BoS and the Parent.

"Cash  Collateral  Account"  means the account to be  established  by the Parent
pursuant to Clause 2.7.

"Certified Copy" means a copy certified as true,  complete and up to date by the
specified  person or, if no-one is  specified,  by either the  secretary  of the
relevant Group Company or the Borrowers' solicitors.

"Cost Savings" means any savings  generated by the Group (and identified as such
in the Management  Information pack delivered  pursuant to Schedule 5) which are
not required for the ongoing working capital purposes of the Group.

"Dangerous  Substances"  means any substances  capable of causing harm to man or
any other  living  organism  or to the  soundness  of repair  and  condition  of
buildings or damaging the environment.

"Default Rate" means the rate which is one per cent (1%) per annum over the rate
at which  interest  and/or  guarantee  fees are paid on the Facility  under this
letter.

"Environmental  Condition" means the presence of any Dangerous Substance on, in,
under or adjacent to any property or any part of it or in any controlled  waters
(as defined in the Water Resources Act 1991) which are on,


<PAGE>

in,  under or adjacent to the property  owned or occupied by a Group  Company or
the escape,  release or migration of any Dangerous  Substance  from any property
owned or occupied by a Group Company.

"Environmental  Law"  means  all laws,  statutes,  regulations,  rules,  orders,
ordinances, directives, codes of practice, circulars, guidance notices and court
decisions  (whether in the UK, UK or  elsewhere)  concerning  the  protection of
human  health or welfare or the  environment  (as  defined in the  Environmental
Protection Act 1990 or the Comprehensive  Environmental  Response,  Compensation
and Liability Act) or the conditions of the work place (as promulgated under the
Occupational   Safety   and   Health   Act  in  the  USA)  or  the   generation,
transportation,  storage, treatment,  management,  handling,  emission, release,
discharge or disposal of Dangerous Substances.

"Environmental Licence" means any licence, authorisation or approval required by
Environmental Law.

"Event of Default" means an event set out in Schedule 6.

"Facility"  means the term loan and guarantee  facility  given under this letter
and the amount of it  outstanding  at any time and the terms  attaching to it as
these may be varied by further agreement between the Borrowers and BoS.

"Facility   Exposure"  means  the  aggregate  of  the  amount  of  the  Advances
outstanding under the Facility and the Guarantee  Exposure (but disregarding any
Advance made in order to reduce the Guarantee  Exposure in order to avoid double
counting).

"FBL" means Furniture  Builders Limited whose  registered  office is 1209 Orange
Street, Wilmington, Delaware 19801, USA.

"Final Repayment Date" means 31 December 2003.

"Financial  Statements"  means the audited  annual  profit and loss  account and
balance  sheet  of  the  relevant  company  for  each  of  its  financial  years
(consolidated   for  each  financial  year  during  which  that  company  has  a
subsidiary) together with related directors' and auditors' reports.

"Full Group Security" means  guarantees in favour of BoS from each Group Company
on account of the obligations of each other Group Company and any other security
(fixed or floating) which BoS may require.

"Group" means the Parent and each of its  Subsidiaries  which is not dormant and
"Group Company" is construed accordingly.

"Guarantee"  means a guarantee issued by BoS pursuant to this letter in form and
content  acceptable to BoS or a letter of credit on behalf of the Borrower under
the terms of the  Uniform  Customs  and  Practice  for  Documentary  Credits (as
revised from time to time) and  otherwise on BoS standard  terms and  conditions
(which will be set out in the BoS application for the documentary credit, a copy
of which will be  provided to the  relevant  Borrower  if so  requested)  and in
accordance with the tariffs applicable for levers of credit issued to the Parent
from time to time.

"Guarantee  Exposure"  means the aggregate  maximum  amount for which BoS may be
liable under a Guarantee or Guarantees from time to time.

"Increased Cost" means:-

1.     an additional or increased  cost incurred by BoS as a result of it having
       entered into, or performing, maintaining or funding its obligations under
       this letter; or

2.     that  portion of an  additional  or  increased  cost  incurred  by BoS in
       making,  funding or maintaining all or any advances  comprised in a class
       of advances formed by or including the Facility; or

3.     a reduction in any amount  payable to BoS or in the  effective  return to
       BoS under the Facility or on its capital; or

4.     the foregone amount of any payment made or interest or other return on or
       calculated by reference to any amount received or receivable by BoS under
       the Facility;
<PAGE>

in each case arising as a result of any change, introduction,  interpretation or
administration  of any law or  regulation  after the date of this  letter or any
compliance after the date of this letter with any law or regulation  relating to
reserve assets,  special  deposits,  cash ratios,  liquidity or capital adequacy
requirements  or any  other  form of  banking  or  monetary  control  (including
controls  and  requirements  of the  Bank of  England,  the  Financial  Services
Authority,  the European  Central Bank or any other  governmental  or regulatory
authority)  or the  introduction  of,  changeover to or operation of a single or
unified European  currency or otherwise but excluding (1) costs  compensated for
by the MLA Costs or (2)  payments  in  respect  of tax under  Clause 9.1 of this
letter or (3) costs not generally applicable to U.K. banks.

"Indemnified Events" means all actions,  suits,  proceedings,  claims,  demands,
liabilities,  costs,  expenses,  losses,  damages and charges whatsoever (except
those arising as a result of the gross  negligence or wilful  misconduct of BoS)
which may occur in relation to or arising out of BoS having  given the  Treasury
Guarantee.

"Intellectual Property Rights" means patents, patent applications,  trade marks,
community  trade marks,  service  marks,  trade names,  brand names,  registered
designs, copyright and all other industrial and intellectual property rights.

"Interest  Payment  Date" means the last  Business Day of each  Interest  Period
unless its  duration is more than three months in which case it will also be the
last Business Day of each three month period during that Interest Period.

"Interest  Period"  means each period  selected  under Clause 2.3 and to which a
rate of interest calculated by reference to that clause applies.

"Issue  Request"  means a written  request  in the form set out in  Schedule  8B
requesting the issue of a Guarantee.

"LIBOR"  means the rate  (expressed  as an annual  percentage  rate) at which US
Dollar deposits in an amount equal to the relevant Advance are offered to BoS in
the London Inter Bank Market by prime banks,  selected by BoS, at or about 11 am
on the first  Business Day of an Interest  Period for the same period and amount
in US Dollar.

"Listing"  means the  admission  to the Official  List of London Stock  Exchange
Limited of any shares of any Group Company or the granting or permission for any
such shares to be dealt in on any  recognised  investment  exchange  (within the
meaning of Section 207 of the  Financial  Services Act 1986) or any other market
for the  public  trading of  securities  in any  country or a reverse  take-over
(within the meaning  contained in the London Stock Exchange  publication  titled
"The Listing Rules" current at the date of this Agreement) by the relevant Group
Company of another  company  whose  shares are  already  the  subject any of the
foregoing.

"LPAL" means London Pacific Assurance  Limited of 6 Minden House,  Minden Place,
St Helier, Jersey.

"Margin" means :-

       3.5%   in respect of Facility Exposure up to $10,000,000; and

       4.5%   in  respect  of  Facility   Exposure   above   $10,000,000  up  to
              $23,000,000.

"Material  Adverse Effect" means any effect which, in the reasonable  opinion of
BoS, might:-

1.     affect the ability of any Group  Company to comply  with its  obligations
       under a BoS Document;

2.     give rise to a breach of the financial covenants set out in Schedule 4;

3.     adversely affect the business, assets or financial condition of the Group
       as a whole; or

4.     (where the context so admits) result in any of the Security Documents not
       being  legal,  valid and binding  on, and  enforceable  substantially  in
       accordance with its terms against any party to that Security  Document or
       not providing BoS with enforceable security over the assets to be covered
       by it.

"Material  Litigation"  means  any  litigation,  arbitration  or  administrative
proceeding raised or threatened against, or defended by or judgement outstanding
in relation to any Group Company,  which involves, or if an


<PAGE>

adverse finding were made would involve,  a total  liability  (whether actual or
contingent) in excess of (pound)50,000  and which is to be reported in detail by
the Borrowers to BoS.

"MLA Costs" means the costs (expressed as an annual percentage at a rate rounded
up to the nearest one eighth per cent)  calculated by BoS in accordance with its
usual practice of complying with any reserve asset and/or special deposit and/or
cash ratio and/or  liquidity  and/or capital  adequacy and/or banking control or
similar requirements of Bank of England,  the Financial Services Authority,  the
European Central Bank or any other governmental or regulatory authority.

"Net  Proceeds"  means the sale  proceeds of any asset  disposed of by any Group
Company and payable to that Group Company less the  reasonable  expenses of sale
approved by BoS but excluding Permitted Disposals.

"Notice of Drawdown"  means a written  notice in the form set out in Schedule 8A
requesting drawdown of an Advance.

"Permitted Borrowings" means:-

1.     the Facility and amounts due in respect of it;

2.     Borrowings  between  Group  Companies  where each have granted Full Group
       Security; and

3.     commitments of members of the Group under finance lease, hire purchase or
       conditional  sale  agreements  or  arrangements  which do not at any time
       exceed (pound)200,000 in aggregate.

Permitted Disposals" means:-

1.     the disposal of assets on an arm's length basis in the ordinary and usual
       course of trading including the use of cash for any such purpose;

2.     disposals  between Group  Companies where the transferee has granted Full
       Group Security;

2.     disposals  where the proceeds are applied  towards the  acquisition  of a
       replacement within 30 days of the disposal;

3.     disposals made other than in the ordinary and usual course of trading and
       not referred to in  paragraphs 1 and 2 above but on an arm's length basis
       and only if the value of the assets  disposed  of (whether by a single or
       several  transaction) when taken together with all similar disposals made
       by the Group is not in total more than $25,000.

"Permitted  Security  Rights"  means (1) liens and  rights of  set-off  securing
obligations  which are not overdue beyond their standard payment dates,  arising
by  operation  of law in the  ordinary  and usual course of trading (2) Security
Rights  arising  out of title  retention  provisions  in a  supplier's  standard
conditions  of supply of goods  acquired  in the  ordinary  and usual  course of
trading or (3) Security Rights granted in terms of the BoS Documents or with the
prior written approval of BoS.

"Potential Event of Default" means any event,  act or condition which,  with the
giving of notice and/or lapse of time,  and/or any other event, act or condition
which,  in the  reasonable  opinion of BoS,  will or is likely to  constitute an
Event of Default.

"Proceeds Account" means the account to be established by the Parent pursuant to
Clause 2.6.

"Qualifying Bank" means a bank for the purposes of Section 349 of the Income and
Corporation  Taxes Act 1988 which is within the charge to UK corporation  tax as
regards  any  interest  payable to it under or in  connection  with this  letter
and/or any other BoS Document at the time when such interest is paid.

"Rate" means 0.5% under BoS base rate as that rate varies from time to time.

"Remedial Action" means any action,  works or operations required at any time to
be carried out by or on behalf of any Group Company in order to remove,  remedy,
prevent,  clean-up,  abate,  contain,  eradicate  or mitigate the effects of any
Environmental Condition, including (without prejudice) any such action, works or
operations  agreed or determined to be carried out pursuant to any  negotiations
entered into with any  statutory  authority by



<PAGE>

any Group Company with a view to mitigating any loss attributed to Environmental
Law or Environmental Condition.

"Sale" means any  transaction  pursuant to which a person (or persons  acting in
concert) obtain control of any Borrower (other than those persons having control
of that Borrower immediately after the date of this letter) or in terms of which
all or substantially  all of the assets of the a Borrower of a Group Company are
sold to any person (other than a member of the Group).

"Secretary's  Certificate  means a certificate as  appropriate  for the relevant
jurisdiction  of each  Borrower to be executed by the  Secretary of the relevant
Borrower.

"Security Documents" means the documents listed under the heading of Security in
Schedule 1 and any other security granted to BoS.

"Security Right" means any mortgage,  charge,  security,  pledge, lien, right of
set-off,  right to retention  of title or other  encumbrance,  whether  fixed or
floating, over any present or future property, assets or undertaking.

"Statutory  Control" means each of the following which affects any Group Company
or any of its assets from time to time:-

1.     any legislation (including delegated legislation);

2.     any consent made or given under any legislation; and

3.     any notice, order or correspondence  related to paragraphs 1. or 2. above
       and having the force of law.

"Sterling" and the figure "(pound)" shall mean the lawful currency of the UK.

"Subsidiary"  and "holding  company"  shall have the  meanings  given to them in
Section 736 of the Companies Act 1985  (including any Subsidiary  acquired after
the date of this letter) and  "Subsidiaries"  shall mean all or any of them,  as
appropriate.

"Treasury" means HBOS Treasury Services PLC (registered number 2692890),  having
its registered office at 33 Old Broad Street, London, EC2N 1HZ.

"Treasury  Guarantee"  means the agreed  form  guarantee  entered  into  between
Treasury and BoS now or in the future in relation to all sums due and payable by
the Parent or any Group  Company under any  hedging/swap/interest  rate/currency
documentation  or any similar  documentation  in respect of any forward  foreign
exchange  contracts  or other  derivative  contracts  entered into now or in the
future between the Parent or any Group Company and Treasury.

"US GAAP" means generally accepted accounting principles in the United States of
America.

"US  Dollars"  and "$" shall mean the lawful  currency  of the United  States of
America.


Interpretation

Any reference in this letter to:-

(1)    statutes,  statutory  provisions and other  legislation shall include all
       amendments,  substitutions,  modifications and re-enactments for the time
       being in force.

(2)    "control" of any company shall be interpreted in accordance  with Section
       840 of the Income and Corporation Taxes Act 1988.

(3)    "including"  shall not be  construed as limiting  the  generality  of the
       words preceding it.

(4)    "a Schedule"  shall be construed as a reference to the  schedules to this
       letter.
<PAGE>

(5)    any term or phrase  defined in the  Companies  Act 1985 (as amended  from
       time to time) shall bear the same meaning in this letter.

(6)    words  importing the singular shall include the plural and vice versa and
       words denoting any gender shall include all genders.

(7)    this letter and to any provisions of it or to any other document referred
       to in this letter shall be construed as references to it in force for the
       time being and as amended, varied, supplemented, restated, substituted or
       novated from time to time.

(8)    a person are to be  construed  to include  references  to a  corporation,
       firm,  company,  partnership,  joint  venture,   unincorporated  body  of
       persons, individual or any state or any agency of a state, whether or not
       a separate legal entity.

(9)    any person are to be  construed  to include  that  person's  assignees or
       transferees or successors in title, whether direct or indirect.

Clause  headings  are for  ease of  reference  only  and are not to  affect  the
interpretation of this letter.



<PAGE>



                                   SCHEDULE 8

                                  The Borrowers


London Pacific Group Limited

Berkeley International Capital Corporation

Berkeley International Capital Limited

North America Fiduciary Services Inc.

Berkeley (USA) Holdings Limited

Berkeley Capital Management

Berkeley Institutional Investments Inc.






<PAGE>







                              --------------------

                                 FACILITY LETTER

                                20 December 2002

                              --------------------






                                BANK OF SCOTLAND


                                Funding of up to

                                   $23,000,000


                                       to


                          LONDON PACIFIC GROUP LIMITED

















                              MACLAY MURRAY & SPENS

                               3 Glenfinlas Street
                                Edinburgh EH3 6AQ
                               Tel: 0131-226-5196
                               Fax: 0131-226-3174