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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )
INTERSTATE NATIONAL DEALER SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
- --------------------------------------------------------------------------------
(Title of Class of Securities)
46102P 10 4
- --------------------------------------------------------------------------------
(CUSIP Number)
STEVEN J. KUMBLE
LINCOLNSHIRE MANAGEMENT, INC.
780 THIRD AVENUE
NEW YORK, NEW YORK 10017
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
FEBRUARY 16, 2000
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box
[_].
Check the following box if a fee being paid with this statement [_]. (A fee is
not required only if the filing person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
<PAGE>
SCHEDULE 13D
CUSIP No. 46102P 10 4 Page 2 of 9 Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSONS Steven J. Kumble
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (Intentionally omitted)
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS PF
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION United States
________________________________________________________________________________
7 SOLE VOTING POWER 30,000
NUMBER OF
SHARES _________________________________________________________________
8 SHARED VOTING POWER 30,000
BENEFICIALLY
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER 30,000
REPORTING
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER 30,000
WITH
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
30,000
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) .64%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON IN
________________________________________________________________________________
<PAGE>
SCHEDULE 13D
CUSIP No. 46102P 10 4 Page 3 of 9 Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSONS Lincolnshire Management,
Inc.
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (Intentionally omitted)
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS N/A
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
________________________________________________________________________________
7 SOLE VOTING POWER 0
NUMBER OF
SHARES _________________________________________________________________
8 SHARED VOTING POWER 0
BENEFICIALLY
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER 0
REPORTING
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER 0
WITH
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.0%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON CO
________________________________________________________________________________
<PAGE>
SCHEDULE 13D
CUSIP No. 46102P 10 4 Page 4 of 9 Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSONS Lincolnshire Equity Fund II,
L.P.
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (Intentionally omitted)
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS N/A
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
________________________________________________________________________________
7 SOLE VOTING POWER 0
NUMBER OF
SHARES _________________________________________________________________
8 SHARED VOTING POWER 0
BENEFICIALLY
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER 0
REPORTING
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER 0
WITH
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.0%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON CO
________________________________________________________________________________
<PAGE>
Item 1. Security and Issuer
Interstate National Dealer Services, Inc.
Common Stock ($.01 Par Value)
Interstate National Dealer Services, Inc.
333 Earle Ovington Boulevard
Mitchel Field, NY 11553-9340
Item 2. Identity and Background
This Statement is being filed by Steven J. Kumble, Lincolnshire
Management, Inc. and Lincolnshire Equity Fund II, L.P. (the "Reporting
Persons"). Mr. Kumble has been the Chairman of the Board of Directors of
Lincolnshire Management, Inc. since he founded the company in 1986. Lincolnshire
Management, Inc. is a privately owned investment firm that has been dedicated to
making private equity investments in companies involved in a broad range of
industries, primarily within the United States. Lincolnshire Equity Fund II,
L.P. is a limited partnership, that was formed to make private equity
investments in leveraged buyouts and recapitalizations of companies. The address
of the Reporting Persons is Lincolnshire Management, Inc., 780 Third Avenue, New
York, New York 10017.
None of the Reporting Persons has, during the last five years, been
convicted in any criminal proceeding (excluding traffic violations or similar
misdemeanors). None of the Reporting Persons has, during the last five years,
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgement, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to federal or state securities laws, or finding
any violations with respect to such laws.
Information with respect to each of the Reporting Persons is given
solely by such Reporting Person and no Reporting Person has responsibility for
the accuracy or completeness of information supplied by another Reporting
Person.
The filing of this Schedule 13D (including all amendments thereto) does
not constitute an admission by any of the persons making this filing that such
persons are a "group" for purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934 (the "Act") or that such persons along with any other
persons are a "group" for purposes of the Act. The Reporting Persons deny that
they should be deemed to be such a "group", and such persons are making this
filing only because they may be deemed to constitute a "group" for purposes of
Section 13(d)(3) of the Act.
Item 3. Source and Amount of Funds or Other Consideration
The source and amount of funds (including commissions) used by each of
the Reporting Persons to acquire the shares of Common Stock reported in Item 5
below was as follows:
NAME AMOUNT SOURCE OF FUNDS
Steven J. Kumble $179,637 personal funds
Lincolnshire Management, Inc. N/A N/A
Lincolnshire Equity Fund II, L.P. N/A N/A
Item 4. Purpose of Transaction
In October, 1999, one of the officers of Lincolnshire Management, Inc.
had discussions with Jack Silver regarding the depressed value of the Company
and the opportunities that it presented to potential investors and/or suitors.
In addition, Mr. Silver put Lincolnshire Management, Inc. in contact with the
Company. Steven J. Kumble and certain other employees of Lincolnshire
Management, Inc. met with Chester J. Luby, the Chairman and Chief Executive
Officer of the Company on at least two occasions to discuss taking the Company
private. On October 29, 1999, Lincolnshire Equity Fund II, L.P. sent a proposed
letter of intent to Mr. Luby pursuant to which Lincolnshire Equity Fund II, L.P.
offered to acquire, through an affiliate, all of the issued and outstanding
stock of the Company for $8.00 per share. Mr. Luby did not respond affirmatively
to this offer. Subsequent to January 1, 2000, Mr. Kumble and Mr. Luby had
several brief conversations relating to the offer. On January 14, 2000,
Lincolnshire Management, Inc. and Jack Silver entered into a letter agreement,
pursuant to which Lincolnshire Management, Inc. agreed that in the event that
Lincolnshire Management, Inc. or any of its affiliates concluded a transaction
pursuant to which Lincolnshire Management, Inc. or any of its affiliates
purchased the business, assets or a substantial equity
<PAGE>
interest in the Company, Lincolnshire Management, Inc. would pay Mr. Silver a
fee of $500,000. On February 16, 2000, Lincolnshire Management, Inc. sent a
covering letter to Mr. Luby, pursuant to which Lincolnshire Management, Inc.
made an offer to acquire through an affiliated partnership all of the issued and
outstanding stock of the Company, free and clear of all liens, claims and
encumbrances for $9.00 per share (approximately $45 million). In connection with
the offer, Lincolnshire Equity Fund II, L.P. sent a proposed letter of intent
regarding the acquisition to the Board of Directors of the Company. The letter
of intent indicates that the offer will expire at 5:00 p.m. on February 29,
2000, unless accepted by the Company.
Other than as described above, none of the Reporting Persons has any
present plans or proposals which would relate to or would result in (a) the
acquisition by any Reporting Person of additional securities of the Company, (b)
an extraordinary corporate transaction, such as a merger, reorganization, or
liquidation involving the Company, (c) a sale or transfer of a material amount
of the assets of the Company, (d) any change in the present Board of Directors
or to fill any existing vacancies on the Company's Board of Directors, (e) any
material change in the present capitalization or dividend policy of the Company,
(f) any other material change in the Company's charter, by-laws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Company by any person, (h) causing a class of securities of the
Company to be delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association, (i) a class of equity securities of the Company
becoming eligible for termination of registration pursuant to Section 12(g)(4)
of the Act, or (j) any action similar to any of those enumerated above. Item 4
disclosure provisions regarding any plans or proposals to make any changes in a
company's investment policy for which a vote is required by Section 13 of the
Investment Company Act of 1940 are inapplicable.
Notwithstanding anything contained herein, each of the Reporting
Persons reserves the right, depending on other relevant factors, to purchase
additional shares of common stock of the Company or to dispose of all or a
portion of his or its holdings of common stock of the Company or change his or
its intention with respect to any and all of the matters referred to in this
Item 4.
Item 5. Interest in Securities of the Issuer
Set forth below is certain information concerning all transactions in
the common stock of the Company in which the Reporting Persons have engaged
during the past 60 days. All of such transactions were effected by brokerage
transactions.
NAME TRANSACTION NUMBER OF PRICE PER
DATE SHARES PURCHASED SHARE
Steven J. Kumble 01/24/00 4,000 5 15/16
01/28/00 6,000 5 15/16
01/31/00 10,000 5 15/16
02/14/00 10,000 5 15/16
The ownership by the Reporting Persons of shares of common stock of the
Company and the percentage of the outstanding shares of common stock of the
Company represented thereby is as follows:
NAME NUMBER OF SHARES PERCENTAGE
Steven J. Kumble 30,000 0.64%
Lincolnshire Management, Inc. 0 0.0%
Lincolnshire Equity Fund II, L.P. 0 0.0%
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
Pursuant to a letter agreement dated January 14, 2000 (attached as
Exhibit 2 hereto), between Lincolnshire Management, Inc. and Jack Silver, Mr.
Silver is entitled to a fee of $500,000 upon the conclusion of the purchase of
the business, assets or a substantial interest in the Company by Lincolnshire
Management, Inc. or any of its affiliates.
Pursuant to a covering letter dated February 16, 2000 (attached as
Exhibit 3 hereto), Lincolnshire Management, Inc. offered to acquire through an
affiliated partnership all of the issued and outstanding stock of the Company,
free and clear of all liens, claims and encumbrances for $9.00 per share
(approximately $45 million).
<PAGE>
Pursuant to a proposed letter of intent dated February 16, 2000
(attached as Exhibit 4 hereto), Lincolnshire Equity Fund II, L.P. offered to
acquire through an affiliate all of the issued and outstanding stock of the
Company, free and clear of all liens, claims and encumbrances for $9.00 per
share (approximately $45 million).
Except as described above, none of the Reporting Persons has any
contracts, arrangements, understandings or relationships (legal or otherwise)
with respect to any securities of the Company, including, but not limited to any
agreements concerning (i) transfer or voting of any securities of the Company,
(ii) finder's fees, (iii) joint ventures, (iv) loan or option arrangements, (v)
puts or calls, (vi) guaranties or profits, (vii) division of profits or loss or
(viii) the giving or withholding of proxies.
Item 7. Material to Be Filed as Exhibits
Exhibit 1 - Joint Filing Statement
Exhibit 2 - Letter Agreement between Lincolnshire Management, Inc.
and Jack Silver dated January 14, 2000.
Exhibit 3 - Letter to the Chairman and CEO of the Company dated
February 16, 2000.
Exhibit 4 - Proposed Letter of Intent dated February 16, 2000.
<PAGE>
Signatures and Power of Attorney
After reasonable inquiry and to the best of knowledge and belief of each
person or entity set forth below, each such person or entity certifies that the
information set forth in this statement is true, complete and correct.
February 23, 2000 /s/Steven J. Kumble
----------------------------------------
Steven J. Kumble
LINCOLNSHIRE MANAGEMENT, INC.
By:/s/Steven J. Kumble
-------------------------------------
Steven J. Kumble
Chairman
LINCOLNSHIRE EQUITY FUND II, L.P.
By: Lincolnshire Equity Partners II, L.P.,
General Partner
By: Lincolnshire Equity II, Inc.,
General Partner
By: /s/Steven J. Kumble
----------------------------
Steven J. Kumble
Chairman
<PAGE>
Exhibit 1
JOINT FILING STATEMENT
Each of the undersigned hereby agrees that the Schedule 13D,
to which this Agreement is attached as Exhibit 1, and all amendments thereto may
be filed on behalf of each such persons.
February 23, 2000 /s/Steven J. Kumble
----------------------------------------
Steven J. Kumble
LINCOLNSHIRE MANAGEMENT, INC.
By:/s/Steven J. Kumble
-------------------------------------
Steven J. Kumble
Chairman
LINCOLNSHIRE EQUITY FUND II, L.P.
By: Lincolnshire Equity Partners II, L.P.,
General Partner
By: Lincolnshire Equity II, Inc.,
General Partner
By: /s/Steven J. Kumble
----------------------------
Steven J. Kumble
Chairman
<PAGE>
Exhibit 2
[Letterhead of Lincolnshire Management, Inc.]
January 14, 2000
Mr. Jack Silver
600 Madison Avenue
15th Floor
New York, NY 10021
Re: INTERSTATE INTERNATIONAL DEALER SERVICES, INC.
Dear Jack:
This letter is to confirm that you have introduced Lincolnshire
Management, Inc. and its affiliates (collectively, "Lincolnshire") to Interstate
International Dealer Services, Inc. ("Interstate"), and that you are actively
proceeding with representatives of Interstate in order to effectuate a
transaction between Lincolnshire and Interstate.
In the event that Lincolnshire concludes a transaction with Interstate
in the form of a purchase of the business, assets or substantial equity interest
in Interstate within 12 months from the date hereof, upon terms and conditions
satisfactory to Lincolnshire, then Lincolnshire will pay, or cause to be paid to
you or your designees, a fee in the amount of $500,000 simultaneously with the
successful conclusion of that transaction.
If the foregoing conforms with your understanding of our agreement,
kindly sign the enclosed copy of this letter under the words "Agreed and
Accepted" and return it to the undersigned.
Very truly yours,
LINCOLNSHIRE MANAGEMENT, INC.
By: /s/Steven J. Kumble
--------------------
Steven J. Kumble
Chairman
AGREED AND ACCEPTED
/s/Jack Silver
- -------------------
Jack Silver
<PAGE>
Exhibit 3
[Letterhead of Lincolnshire Management, Inc.]
February 16, 2000
Chester J. Luby
Chairman and CEO
Interstate National Dealer Services, Inc.
The Omni, Suite 700
333 Earle Ovington Blvd.
Mitchel Field, NY 11553-9340
Dear Chester:
From the time of our original discussions with you to date, the market
price of the Interstate shares has shown little improvement. This confirms our
view that the interests of the public shareholder would be best served by taking
the company private.
Notwithstanding the stagnant market value, we have revised the annexed
letter as a result of our conversations with you and our internal analysis to
increase the purchase price per share from $8 to $9. This represents a premium
of 58% over the current market price and increases the aggregate purchase price
from $40,000,000 to $45,000,000, all payable in cash at closing.
The annexed letter has been revised accordingly. Moreover, it has been
addressed to the Board of Directors of Interstate, and we believe that it is
appropriate that it be deemed an "offer" to be considered and acted upon by the
Board.
We look forward to hearing from you.
Best regards,
LINCOLNSHIRE MANAGEMENT, INC.
By: /s/ Steven J. Kumble
---------------------
Steven J. Kumble
Chairman
Enclosure
<PAGE>
Exhibit 4
[Letterhead of Lincolnshire Management, Inc.]
February 16, 2000
CONFIDENTIAL
Board of Directors
Interstate National Dealer Services, Inc.
333 Earle Ovington Blvd.
Mitchel Field, NY 11553
Mr. Chester J. Luby, individually
Ms. Cindy H. Luby, individually
Mrs. Joan S. Luby, individually
Gentlemen:
This letter sets forth our mutual understanding in connection with the
proposed acquisition, by an affiliate of Lincolnshire Equity Fund II, L.P. ("LEF
II"), of all of the outstanding capital stock (the "Stock") of Interstate
National Dealer Services, Inc. (the "Company"), upon the terms and conditions
set forth herein:
1. THE COMPANY - We understand that the Company, headquartered in
Mitchel Field, NY is incorporated in Delaware, and is engaged in
the design, marketing, and administration of service contracts and
warranties for new and used motor vehicles and recreational
vehicles, and, to a lesser extent, water craft, motor cycles, and
other vehicles. Through an affiliated insurance company, the
Company obtains insurance coverage to cover sellers' liability for
claims under its vehicle service contracts and assists with the
making, processing, and adjustment of claims. There are presently
outstanding Five Million (5,000,000) Shares of common stock of the
Company, and Chester J. Luby, Joan S. Luby, and Cindy H. Luby own
(collectively, the "Luby Shareholders") approximately 30% of the
outstanding shares of the Company.
<PAGE>
Interstate National Dealer Services, Inc.
February 16, 2000 Lincolnshire Management, Inc.
Page 2
2. PURCHASE OF STOCK - LEF II proposes to acquire, through an
affiliated partnership (the "Buyer"), all of the Stock of the
Company, free and clear of all liens, claims and encumbrances.
3. PURCHASE PRICE - The aggregate purchase price to be paid by the
Buyer for the Stock shall be $9 per share or approximately
Forty-Five Million ($45,000,000) Dollars (the "Purchase Price"),
payable in cash at closing.
4. AGREEMENT AND PLAN OF MERGER - The transaction shall be subject to
the execution and delivery of a definitive Agreement and Plan of
Merger (the "Agreement") among the Company, Chester J. Luby, Joan
S. Luby, Cindy H. Luby, its shareholders (collectively, the "Luby
Shareholders") and the Buyer. The Agreement may contemplate a
tender for the outstanding shares of common stock of the Company
at a price of $9 per share and a subsequent merger pursuant to
which those shareholders not participating in the tender shall
receive $9 per share for their outstanding shares. The Agreement
will contain customary representations and warranties, covenants,
terms and conditions as are appropriate for a transaction of this
nature, including the following, which shall be true when made and
as of the date of closing:
a. The financial history and condition of the Company shall not
be materially different from that disclosed in the Company's
audited financial statements for the fiscal years ended,
October 31, 1997, October 31, 1998, and October 31, 1999 and
the internally prepared financial statements for the
year-to-date period ended January 31, 2000, provided to
Lincolnshire Management, Inc. (the "Financial Materials");
b. There shall be no material adverse changes in the business or
prospects of the Company from that described in the Financial
Materials;
c. The Company's business and assets shall consist of all the
tangible and intangible assets, real, personal and mixed,
used in the operation of the business, including cash,
accounts receivable, inventory, equipment, office furniture
and furnishings, trade names and patents, all operating
contracts, agreements, licenses and leases, real estate, and
the property, plant and equipment (the "Assets");
d. The Assets of the Company shall not be materially different
from the assets described in the Financial Materials, and the
material contracts to which the Company is a party shall be
in full force and effect;
<PAGE>
Interstate National Dealer Services, Inc.
February 16, 2000 Lincolnshire Management, Inc.
Page 3
e. There shall be no bank or other institutional borrowings of
the Company, except those, which will be satisfied by the
Company or its shareholders at closing from the proceeds of
the sale. There shall be no other liabilities or obligations,
either accrued, absolute, contingent or otherwise and no
encumbrances on the Assets which are material, except (i) as
disclosed by the Company to the Buyer in the Agreement and
acceptable to Buyer, (ii) liabilities and encumbrances which
will be satisfied by the Company or its shareholders from the
proceeds of sale at closing, or (iii) liabilities incurred in
the normal or ordinary course of business, or which are not
individually or in the aggregate, material and adverse;
f. There shall be no material adverse change from the ratio of
current assets to current liabilities or from the net working
capital or tangible net worth at closing from that set forth
in the Balance Sheet of the Company as of October 31, 1999.
At the close, working capital shall be not less than Fifty
Million ($50,000,000) Dollars.
g. There shall be no acceleration or discounting in the
collection of accounts receivable, nor any delay in the
payment of accounts payable, and collection and payment of
such accounts, respectively, shall at times be made in the
ordinary course of business;
h. The Company shall be in material compliance with all federal,
state and local laws, regulations and ordinances relating to
pollution control, water usage and the protection of the
environment;
i. The Luby Shareholders presently involved in the management of
the Company will agree not to compete with the Company on
terms acceptable to the Buyer; and
j. If the Company shall breach its obligations under this Letter
of Intent or enter into a binding agreement with respect to a
Competing Transaction prior to May 15, 2000, then, unless LEF
II shall have elected to terminate negotiations with respect
to the proposed transaction prior to the execution by the
Company of the agreement respecting the Competing
Transaction, then the Company shall pay LEF II all of the
Buyer's legal, financial, advisory, financing, accounting,
travel and other related costs and expenses incurred by the
Buyer in connection with the preparation, execution, and
delivery of this letter, the Agreement and Plan of Merger,
and all related matters up to a maximum of One Million
($1,000,000) Dollars.
<PAGE>
Interstate National Dealer Services, Inc.
February 16, 2000 Lincolnshire Management, Inc.
Page 4
k. If at any time following the execution and delivery of the
Agreement and Plan of Merger, the Company shall have entered
into a binding agreement with respect to a Competing
Transaction, or shall have withdrawn or modified adversely
its recommendation of the Agreement and Plan of Merger as a
result of a receipt of a Superior takeover proposal, the
Company shall pay to the Buyer a sum equal to the number of
the then issued and outstanding shares of common stock
multiplied by $.45 (forty-five cents) per share plus all of
the Buyers legal, financial advisory, financing, accounting,
travel and other related costs and expenses incurred by the
Buyer in connection with the preparation, execution, and
delivery of this letter, the Agreement and Plan of Merger,
and all related matters up to a maximum of One Million
($1,000,000) Dollars. A Competing Transaction, as used
herein, shall mean a consummated transaction originating as a
Third Party Offer (as defined in paragraph 10 below).
5. EQUITY INVESTMENT - The proposed transaction will require an
equity investment in the range of Eleven Million to Thirteen
Million ($11,000,000 to $13,000,000) Dollars. Chester Luby and
Cindy Luby, together with selected other members of management
(collectively, the "Management Group") shall contribute not less
than Twenty (20%) nor more than Forty (40%) Percent or the equity
investment for a corresponding percentage of the equity interest
in the Company. LEF II will contribute, in cash, the balance of
the equity investment. The initial equity investment may be
subject to subsequent dilution from warrants issued to
participating subordinated debt lenders, which dilution shall be
on a pro rata basis. You, in your sole discretion, shall allocate
the contributions of the Management Group, as well as the
distribution of equity interests within the group.
6. FUTURE INVESTMENT RIGHTS - The Buyer intends to grow the Company
via both acquisition and internally generated growth. The
Management Group shall have the right to invest additional equity
dollars in connection with future acquisitions in order to
maintain its pro-rata ownership interest in the Company.
7. MANAGEMENT AGREEMENTS - The Buyer regards the continuing
participation of Chester Luby and Cindy Luby as critically
important for the continued success of the Buyer and for the
proposed financing. Prior to closing, Mr. Luby and Ms. Luby shall
have negotiated mutually satisfactory executive employment
agreements pursuant to which each agrees to serve as an officer of
the Buyer, which agreements will contain customary management
incentives, non-compete and confidentiality restrictions as are
customary in agreements of this nature.
<PAGE>
Interstate National Dealer Services, Inc.
February 16, 2000 Lincolnshire Management, Inc.
Page 5
8. CONFIDENTIALITY - The Buyer shall at all times maintain the
confidentiality of all confidential and/or proprietary information
of the Company and will not disclose such information, or use it
for any purpose other than its evaluation of the proposed
transaction, without the prior consent of the Company, or as
otherwise required by law. Any press releases or public
disclosures of any kind must be approved by both parties prior to
such release or disclosure. Notwithstanding the foregoing,
following execution of this letter, the Buyer may disclose such
information to selected financial institutions and investors in
the course of negotiating the financing of the proposed
transaction.
9. EXPENSES - The Company and the Buyer shall each be responsible for
their own respective legal, due diligence, accounting and/or
financing fees or expenses.
10. EXCLUSIVITY PERIOD - In connection with the proposed transaction,
you understand that the Buyer will require a brief period of
exclusivity and cooperation from the Company, the Luby
Shareholders, and their respective management to complete its
final due diligence investigation. For a period of ninety (90)
days from the date of this Letter (the "No Shop Period"), or such
earlier date when LEF II shall advise the Company in writing that
this Letter of Intent is terminated, neither the Company nor its
officers, employees, affiliates, or representatives (including,
without limitation, financial advisors, attorneys or accountants),
or the Luby Shareholders will, directly or indirectly, solicit,
initiate or encourage (including the furnishing of any substantive
financial or operational material information concerning the
Company or its subsidiaries) any Third Party Offer. A Third Party
Offer, as used herein, shall mean any proposals or offers from any
person other than LEF II or its representatives relating to a
merger, sale (including a sale of any equity or voting interest in
the Company), business combination involving the Company, sale of
any material portion of its assets, or transaction involving a
tender offer for shares of the Company. The Company shall notify
LEF II of any such proposals made by any such person prior to the
expiration of the No Shop Period. In addition, the Company, its
officers, employees, affiliates or representatives (including,
without limitation, financial advisers, attorneys or accountants)
will negotiate with LEF II on an absolutely exclusive basis for
the acquisition of the Company during the No Shop Period and will
not negotiate with any other party with respect to the acquisition
of the Company, or its shares or assets other than sales of assets
in the ordinary course of business, provided, however, that the
agreement not to negotiate with others shall not prohibit (i) the
Company or its Board of Directors from complying with its
obligations, if any, under applicable law, to disclose the
existence and terms of any Third Party Offer or (ii) prohibit the
Board of Directors, if advised by its legal counsel that its
fiduciary duty requires it to do so, from furnishing public
<PAGE>
Interstate National Dealer Services, Inc.
February 16, 2000 Lincolnshire Management, Inc.
Page 6
or non-public information to or enter into discussions or
negotiations with any person or entity that makes an unsolicited
inquiry with respect to acquiring the Company or approving a Third
Party Offer. If the Company receives an unsolicited Third Party
Offer or takes any of the actions described in the preceding
sentence, it shall promptly inform Purchaser of such facts, the
identity of the offeror or potential offeror and, if a Third Party
Offer has been received, the material terms thereof. During such
period of exclusivity, you will not negotiate with any other party
for the acquisition of the Company and the Buyer and you will
exert every commercially reasonable effort to negotiate and
execute a definite Agreement and to consummate the acquisition, in
form and substance satisfactory to the respective parties and
their attorneys, which shall contain such terms, provisions and
conditions as are customary in transactions of this nature.
11. ONLY SPECIFIC PROVISIONS ENFORCEABLE - This letter is only a brief
summary of certain of the terms and conditions of the transactions
proposed herein. It is not a definitive agreement by the Company
or LEF II to consummate the transaction or an undertaking to enter
into any such agreement. Such transaction can only be consummated
if definitive written agreements have been entered into.
Notwithstanding the foregoing, the parties hereto agree to be
bound by paragraphs 4(j), 4(k), 8, 9 and 10.
12. TAX ISSUES - The parties hereto agree that they shall use their
best efforts to structure the transaction in a manner that is
mutually beneficial to such parties from a tax standpoint.
13. ASSIGNMENT - This Letter of Intent shall not be assigned by the
Buyer, the Company, or the Luby Shareholders without the written
consent of all parties.
If you agree to the foregoing, please so signify by executing the
enclosed copy of this letter in the space provided and delivery it to us. This
proposal will be terminated unless fully signed and delivered to us prior to
5:00 p.m. on February 29, 2000.
Very truly yours,
LINCOLNSHIRE EQUITY FUND II, L.P.
By: Lincolnshire Equity Partners II, L.P.,
General Partner
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Interstate National Dealer Services, Inc.
February 16, 2000 Lincolnshire Management, Inc.
Page 7
By: Lincolnshire Equity II, Inc.,
General Partner
By: /s/ Steven J. Kumble
------------------------------
Steven J. Kumble
Chairman
AGREED TO AND ACCEPTED BY:
INTERSTATE NATIONAL DEALERS SERVICES, INC.
By: ----------------------------------
Chester J. Luby
Chief Executive Officer, for the Board
By: ----------------------------------
Cindy H. Luby
President and Chief Operating Officer, for the Board
By: ----------------------------------
Chester J. Luby, individually
By: ----------------------------------
Cindy H. Luby, individually
By: ----------------------------------
Joan S. Luby, individually
