Suppose that L and M meet at P and Q.
If P or Q lies on N, then we can invert in a circle with the common point as centre.
This gives a configuration with three extended lines. We have dealt with such cases.
We may now suppose that Q is not on N. By inverting in the circle through P with centre Q,
we can assume that L and M are extended lines meeting at P, and that N is a circle.
The circle N cuts L and M twice each.
Observe that no extended line can touch the non-parallel lines L and M.
Also, a circle touching these lines has its centre on a bisector of one of the angles made by
the lines L and M. The lines L and M divide the plane into four sectors,
and each of the
tangent circles lies in one of the sectors.
The point P cuts L into two half-lines. If N cuts both, then P lies inside N, so that N also cuts
both parts of M. Otherwise, N cuts one of the half-lines of each of L
and M.
We can use a CabriJava applet to investigate these two cases: