The Leeds chairman, Peter Ridsdale, had given Tottenham permission to speak to the 53-year-old Scot yesterday after talking to Sugar by telephone from Leeds' hotel on the island of Madeira, following the Uefa Cup victory over Maritimo on Tuesday. Ridsdale's decision was also influenced by Graham's request that he be allowed to hear what Spurs are offering.
It is understood that Leeds, who were first approached two weeks ago by Spurs, are to receive pounds 2.5m compensation for losing the former Arsenal manager.
Leeds - unbeaten in the Premiership this season - are now likely to go for Gordon Strachan, the Coventry City manager, as a replacement. Strachan is the clear favourite of Ridsdale, who may also seek to bring the midfielder Gary McAllister back to Elland Road. Ridsdale is prepared to approach Coventry for permission to speak to Strachan. McAllister, the injured Scotland captain, could also leave Highfield Road to become Strachan's assistant at Leeds.
Other names in the frame are Leicester's Martin O'Neill and Birmingham's Trevor Francis, while Norway's former coach, Egil Olsen, is a surprise contender.
"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. He is under contract until June 2001, with Ridsdale maintaining over the last fortnight that he expected him to see out that deal.
Leeds fans fear that once Graham agrees a deal with Sugar, which it is believed will be pounds 6m over four years, he will then return to Elland Road to try to poach O'Leary and a few of Leeds' best players.
One he might take is the striker Jimmy Floyd Hasselbaink, who is grateful to Graham for giving him his chance in the Premiership and thinks the Scot has improved his game since he came to England. On the assumption that Graham was leaving, the Dutchman said yesterday: "If the next man comes in and he wants to build a team to win things then I will sign a six-year contract tomorrow."
But he added: "It still all depends on what is going to happen and that not only goes for me but also for everyone at the club. I love Leeds. I'm looking for another house in the city. I certainly don't want to see the man who brought me go."
Born: 30 November 1944 in Coatbridge, Scotland
1961-63 Aston Villa; 1963-66 Chelsea; 1966-72 Arsenal; 1972-74 Manchester United; 1974-76 Portsmouth; 1976-77 Crystal Palace.
League games: 455. Goals: 105
Honours: Chelsea (League Cup winners 1965), Arsenal (Fairs Cup winners 1970, League Championship 1971, FA Cup winners 1971)
Scotland: 12 caps (1971-73); 3 goals.
1982-86 Millwall; 1986-95 Arsenal
1996-98 Leeds United
Main honours: Arsenal (Champions 1989, 1991; FA Cup winners 1993; League Cup winners 1987; 1993. European Cup-Winners' Cup winners 1994)Reuse content