The Leeds chairman, Peter Ridsdale, had given Tottenham permission to speak to Graham yesterday after talking to Sugar by telephone from Leeds' hotel on the island of Madeira, following the Uefa Cup victory over Maritimo on Tuesday.
The Leeds chairman was first approached two weeks ago by his Spurs counterpart. It is believed that Leeds are looking for around pounds 2.5m compensation for losing the former Arsenal manager.
"I am obviously delighted that we have been given permission to speak to George," Sugar said. "It has taken us a long time just to get to this position, and hopefully we can sort out a deal."
Ridsdale said: "I can confirm that we have come to an arrangement with Tottenham Hotspur whereby they have agreed to pay compensation in line with the contract that George Graham signed last December.
"I have spoken to George and he has asked for permission to talk to Tottenham, therefore we have given George that permission to speak with them.
"At the moment George is still our manager until somebody tells me otherwise. But we now have to anticipate that we will go into Saturday's game [at home to Leicester] without him. We have a very able assistant in David O'Leary - and Eddie Gray - and if George is not available to pick the team on Saturday then we will ask them to make sure it is business as usual.
"We have agreed not to say how much compensation has been paid, but as far as I am concerned we have been fully recompensed for the clause in George's contract."
Graham, who has been manager at Leeds since September 1996, has spoken of his desire to return to London, and it will be a major surprise if he fails to accept Spurs' offer. He is under contract at Leeds until June 2001, with Ridsdale maintaining, in vain it now seems, over the last fortnight that he fully expected the 53-year-old Scot to see out that deal.
Now it seems that Leeds are likely to go for Gordon Strachan, the Coventry City manager, as a replacement for Graham.
Strachan is the clear favourite of Ridsdale - who may also seek to bring the Scottish international midfielder Gary McAllister back to Elland Road.
Ridsdale is prepared to approach Coventry for permission to speak to Strachan and would be willing to pay compensation. McAllister, the injured Scotland captain, could also leave Highfield Road to become Strachan's assistant at Leeds.
McAllister is just recovering from a knee ligament operation but could be tempted by a player-coach role at Leeds, as he has long-term managerial ambitions.
Although Strachan is Ridsdale's choice, there are other names being mentioned at Leeds. Leicester's Martin O'Neill and Birmingham's Trevor Francis have their backers, while Norway's former coach, Egil Olsen, is a surprise contender.
Olsen, who is now at the little Norwegian club Vaalerenga, changed his mind about retiring from senior football after the World Cup.Reuse content