TUCKER, Ga. -- Financially troubled Paragon Mortgage Corp. has entered into an agreement under which it would be folded into a new Utah corporation and will also seek to develop a gaming business.

The Salt Lake City company, Eastern Emerald Inc., would exchange all of its common stock for 70% of Paragon's outstanding common stock.

The transaction is expected to close by Sept. 9.

If the transaction closes, Eastern Emerald shareholders will immediately be issued 18.7 million shares of Paragon common stock, with additional shares to be issued later.

When the transaction is completed, Paragon will also be required to issue about two million shares to unaffiliated parties as finders' fees.

The agreement between Paragon and Eastern Emerald provides that after the transaction is completed, Paragon will:

* Do a 1-for-4 reverse stock

* Be recapitalized.

* Change its name.

* Change its state of registration from Georgia to Nevada.

* Transfer all assets and liabilities to a wholly owned subsidiary.

Eastern Emerald has agreed that it will have a net worth of $4 million, represented by certificates of deposit that will have been assigned to it.

Eastern Emerald has also agreed to enable Paragon to obtain immediate operating capital pending the evaluation of plans, and the related capital requirements, to improve financial results.

If an acceptable plan is developed, Eastern Emerald will provide up to $1 million in subordinated capital to bolster the financial condition of Paragon.

Eastern Emerald has also agreed to use its best efforts to develop a gaming business in a new corporation that will have a net worth of about $15 million. The new gaming corporation will become a wholly owned subsidiary of Paragon in exchange for up to 20 million presplit shares of Paragon's common stock.

Those holding Paragon stock before the transaction will own approximately 27.1% of its outstanding common stock.

Eastern Emerald shareholders will own about 65.8%, and the finders will own about 7.1%. These percentages will change slightly after the additional shares are issued.

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