Smith is set for Old Trafford within the next 48 hours for around £7m, with The Whites also getting Pugh in part-exchange.
Smith will undergo a medical in Manchester on Wednesday and with players on high wages at Elland Road, Leeds will need to rely more on youth if they are to ease their financial woes and mount a serious promotion challenge next season in Division One.
Pugh has only played against West Brom and Northampton in the League and FA Cup respectively for Manchester United.