Not sure why anyone would call a business agreement or contact a "project", but here's pretty much everything:
Grim Natwick knew Walt's feature would be big and probably knew from his connections there that Walt would want him to animate the lead female. When Iwerks realized that Natwick was moving along he saw the writing on the wall; Natwick was essentially the creative director, doing a lot of directing and animation on the Iwerks shorts he directed, and had brought in other NY talent that had already jumped to Disney. Despite the usually weak story material Natwick was given, he did shorts of good quality, so Ub Iwerks knew he had to keep Natwick in order to keep that quality afloat, supposedly offering a partnership in the studio to keep him there. But Grim Natwick just didn't accept it which makes sense to me, he was more an animator than a director in some ways, but he was a far better director than I think he himself may of thought. Since it didn't happen, it just fell apart there.
That's really it. If its true, its a testament to the importance of Grim Natwick at the studio. It was for the better he didn't do it; the studio got pulled from under the rug pretty quickly in Spring 1936