This initial agreement had a term of six months, to allow for Emperor to undertake initial due diligence on the project and to afford the parties time to negotiate and execute definitive joint venture documentation. From September 2007, Emperor management attempted to convene meetings with the Counterparties, through Mr Willis, but Emperor was repeatedly informed of the cancellation of these meetings at short notice. In early 2008, the Counterparties, once again through Mr Willis, requested a rescheduling of payments to be made under the Alliance Agreement and Emperor agreed to the rescheduling. In February 2008, complete joint venture documentation, reflecting the discussions with Mr Willis on behalf of the Counterparties, was presented to Mr Willis for review by the Counterparties. Several dates were set for meetings in Jakarta for a joint review of the documentation, but these meetings were once again cancelled on short notice by the Counterparties through Mr Willis. In March 2008, Mr Willis indicated to Emperor that the Indonesian Counterparties no longer wished to proceed in cooperating with Emperor, as they were seeking more money and wanted an Indonesian joint venture partner, and he also indicated that they would not sign the joint venture documentation, or an extension of the Initial Alliance Agreement, which would lapse on 31 March 2008.
Thereafter, in April 2008, Maya and Reza contacted Emperor management and indicated that they wished to continue a relationship with Emperor and indicated that they had not made a request for more money or recorded a preference for an Indonesian partner. Rather, they indicated that Mr Willis had been trying to persuade them that they should discontinue the cooperation with Emperor (despite the expenditure of funds in excess of A$1 million by Emperor), in favour of a transaction with a large Indonesian conglomerate. They also indicated that they had been requested to sign a new alliance agreement with an investor sourced by Mr Willis.
Due to the misinformation being provided to it by Mr Willis and as Maya and Reza were the shareholders in PT IMN, Emperor entered into discussions directly with Maya and Reza to formalise an ongoing joint venture arrangement in respect of the Project. Once the terms of this agreement were finalised, the Indonesian Counterparties indicated to Mr Willis that they no longer wished to continue their collaboration with him, due to the breaches of trust which had occurred. Mr Willis had been acting as a technical advisor and financier to PT IMN, and Emperor agreed to reimburse Mr Willis for his expenditure on the Project to date. After a negotiation regarding the amount of the reimbursement, binding settlement documentation was executed between Emperor and Mr Willis and his associated companies, under the terms of which Mr Willis accepted an amount of $2 million and acknowledged that he had no further claims or entitlements in respect of the Project or PT IMN. PT IMN and Mr Willis additionally executed a document terminating all arrangements in place between those parties.
In April 2008, Emperor entered into an agreement with PT IMN, Maya and Reza (the "Alliance Agreement"), to regulate the ongoing working relationship at the Project. The Alliance Agreement provided that Emperor could earn an 80% economic interest in the Project by spending A$8 million in milestone payments and project expenditure and would thereafter sole fund A$42 million in project expenditure. The earn-in percentage had been increased from 70% under the Initial Alliance Agreement by reason of Emperor's A$2 million payment to Mr Willis and his associates, who were no longer involved in the Project, as the agreed reimbursement of expenditure by him and in settlement of any entitlements to the Project. As Indonesia was in the process of drafting a new mining law at the time the Alliance Agreement was entered into, the agreement proposed an indicative mining services structure for the joint venture going forward, but noted that the parties would amend this structure to bring it into line with the new mining law, once implemented. It should be noted that cooperation agreements with terms similar to the one proposed under the Alliance Agreement were commonly used by foreign companies cooperating with Indonesian mining companies, and the type of arrangements put in place had been viewed as bankable at another project of which Emperor was aware. Subsequent to the promulgation of the new Indonesian Mining Law in 2009, and implementing regulations in 2010, several foreign companies who had operated under similar cooperation agreements with local Indonesian mining companies went on to convert their contractual rights in respect of mining projects into direct shareholding in the Indonesian companies without event.
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