Pearson said: "Life goes on and we have to maximise what we can for the club, and £1million is a quite incredible amount.
"We have to make a decision in the next couple of days, but when a player has turned down three contract offers it's fairly obvious he isn't going to stay."
Speculation over Fagan's future has been rife over the last few weeks as the player turned in some of his best performances since joining the club, and his omission from yesterday's squad - thus keeping him eligable to play in further FA Cup matches this season for any team he joins - was a big indication that he'd be moving on.
Fagan's scored 15 goals in 70 starts and 14 substitute appearances, mostly up front or on the right wing, since joining in March 2005. He cost the club around £125,000 to move from Colchester, so his transfer to Derby would represent a great return for the club. It will match the £750,000 City received for Andy Payton in 1991, though with the promotion bonus and a sell-on clause should Derby sell him, it could end up becoming the second highest figure City have received for a player, Leon Cort's £1.25m move to Crystal Palace being the highest.
Finances will be further boosted after yesterday's draw with Middlesbrough in the FA Cup leads to a replay at the Riverside on Tuesday 16th January.
Phil Brown has revealed he wants to bring in up to four new players, with a second spell on loan for Danny Mills a possibility given the upturn in the club's finances.