THE LESLIE FAY COMPANY, INC.

                  1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
                       NONQUALIFIED STOCK OPTION CONTRACT


           THIS  NONQUALIFIED  STOCK OPTION CONTRACT entered into as of June 10,
1997  between  THE  LESLIE  FAY  COMPANY,  INC.,  a  Delaware  corporation  (the
"Company"), and _________________ ("Optionee").

                              W I T N E S S E T H:

1.         The Company,  in accordance with the terms and conditions of the 1997
           Non-Employee  Director Stock Option Plan of the Company (the "Plan"),
           hereby  grants to the  Optionee an option to purchase an aggregate of
           10,000  shares of Common Stock (the  "Option  Shares") at an exercise
           price of $6.18 per share,  being  equal to the fair  market  value of
           such  shares  on the date  hereof.  This  option is not  intended  to
           constitute  an incentive  stock option  within the meaning of section
           422 of the Internal Revenue Code of 1986, as amended (the "Code").

2.         The  term of this  option  shall be 10  years  from the date  hereof,
           subject to earlier  termination as provided in the Plan.  This option
           shall vest and become exercisable as follows:

                      (a) General. This option shall become exercisable (i) with
           respect to 3,333 of the shares of Common Stock subject thereto on the
           first  anniversary  of the date of  grant;  (ii) with  respect  to an
           additional 3,333 of the shares of Common Stock subject thereto on the
           second anniversary of the date of grant; and (iii) with respect to an
           additional  3,334 shares of Common Stock subject thereto on the third
           anniversary of the date of grant.

                     (b) Change of  Control.  This  option  shall  become  fully
           exercisable upon the occurrence of a Change of Control.

                     The right to purchase Option Shares under this option shall
           be  cumulative,   so  that  if  the  full  number  of  Option  Shares
           purchasable  in a period shall not be  purchased,  the balance may be
           purchased at any time or from time to time thereafter,  but not after
           the expiration of the option.

3.         This option shall be exercised by giving five business  days' written
           notice to the Company at its then  principal  office stating that the
           Optionee is exercising the option hereunder, specifying the number of
           shares  being  purchased  and  accompanied  by payment in full of the
           aggregate  purchase price therefor (a) in cash or by certified check,
           (b) with  previously  acquired shares of Common Stock which have been
           held  by the  Optionee  for the  applicable  period  required  by any
           Company plan or agreement with the Company pursuant



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           to which such shares were issued and if not so restricted, which have
           been  held for at  least  six  months,  or (c) a  combination  of the
           foregoing.  Notwithstanding the foregoing,  the purchase price may be
           paid by  delivery  by the  Optionee  of a properly  executed  notice,
           together  with a copy of his  irrevocable  instructions  to a  broker
           acceptable  to the Board,  to deliver  promptly  to the  Company  the
           amount  of sale or loan  proceeds  sufficient  to pay  such  purchase
           price.

4.         The Company may withhold  cash or shares of Common Stock to be issued
           to  the  Optionee  in the  amount  that  the  Company  determines  is
           necessary  to  satisfy  its  obligation  to  withhold  taxes or other
           amounts incurred by reason of the grant or exercise of this option or
           the   disposition   of  the   underlying   shares  of  Common  Stock.
           Alternatively,  the  Company  may  require  the  Optionee  to pay the
           Company such amount in cash promptly upon demand.

5.         Notwithstanding  the foregoing,  this option shall not be exercisable
           by  the  Optionee  unless  (a) a  Registration  Statement  under  the
           Securities  Act of 1933,  as  amended  (the  "Securities  Act")  with
           respect  to the  shares  of  Common  Stock  to be  received  upon the
           exercise of this option shall be effective and current at the time of
           exercise or (b) there is an  exemption  from  registration  under the
           Securities  Act for the  issuance of the shares of Common  Stock upon
           such  exercise.  The Optionee  hereby  represents and warrants to the
           Company that,  unless such a Registration  Statement is effective and
           current at the time of exercise of this option,  the shares of Common
           Stock to be issued upon the  exercise of this option will be acquired
           by the Optionee for his or her own account,  for investment  only and
           not with a view to the resale or distribution thereof.

6.         Notwithstanding  anything herein to the contrary,  if at any time the
           Board  shall  determine,  in its  discretion,  that  the  listing  or
           qualification of the shares of Common Stock subject to this option on
           any securities  exchange or under any applicable  law, or the consent
           or  approval  of any  governmental  agency  or  regulatory  body,  is
           necessary or desirable as a condition to, or in connection  with, the
           granting  of an  option  or the  issue  of  shares  of  Common  Stock
           hereunder,  this  option  may not be  exercised  in  whole or in part
           unless such listing,  qualification,  consent or approval  shall have
           been effected or obtained free of any  conditions  not  acceptable to
           the Board.

7.         The Company may affix  appropriate  legends upon the certificates for
           shares of Common  Stock  issued upon  exercise of this option and may
           issue such "stop  transfer"  instructions  to its  transfer  agent in
           respect of such shares as it  determines,  in its  discretion,  to be
           necessary or appropriate to (a) prevent a violation of, or to perfect
           an exemption  from, the  registration  requirements of the Securities
           Act, or (b) implement the  provisions of the Plan or this Contract or
           any other agreement between the Company and the Optionee with respect
           to such shares of Common Stock.



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8.         Nothing in the Plan or herein  shall  confer  upon the  Optionee  any
           right to continue in the service of the Company or any Affiliate,  or
           interfere in any way with any right of the Com pany or any  Affiliate
           to terminate such service at any time.

9.         The  Company  and  the  Optionee  (by his or her  acceptance  of this
           option)  agree  that they will both be subject to and bound by all of
           the terms and  conditions  of the Plan,  a copy of which is  attached
           hereto  and made a part  hereof.  Any  capitalized  term not  defined
           herein  shall have the  meaning  ascribed  to it in the Plan.  In the
           event of a conflict  between the terms of this Contract and the terms
           of the Plan, the terms of the Plan shall govern.

10.        The Optionee (by his or her acceptance of this option) represents and
           agrees that he or she will comply with all  applicable  laws relating
           to the  Plan  and the  grant  and  exercise  of this  option  and the
           disposition  of the shares of Common Stock  acquired upon exercise of
           the  option,  including,   without  limitation,   federal  and  state
           securities and "blue sky" laws.

11.        This option is not  transferable  by the Optionee  otherwise  than by
           will or the laws of descent and  distribution  and may be  exercised,
           during the  lifetime  of the  Optionee,  only by the  Optionee or the
           Optionee's legal representatives.

12.        This  Contract  shall be binding upon and inure to the benefit of any
           successor  or assign  of the  Company  and to any heir,  distributee,
           executor,  administrator  or  legal  representative  entitled  to the
           Optionee's rights hereunder.

13.        This  Contract  shall be governed by, and  construed  and enforced in
           accordance with, the laws of the State of New York, without regard to
           the conflicts of law rules thereof.

14.        The  invalidity,  illegality  or  unenforceability  of any  provision
           herein shall not affect the validity,  legality or  enforceability of
           any other provision.

15.        The Optionee (by his or her  acceptance  of this option)  agrees that
           the Company may amend the Plan and the option granted to the Optionee
           under the Plan, subject to the limitations contained in the Plan.

           IN WITNESS WHEREOF, the parties hereto have executed this Contract as
of the day and year first above written.


                                                  THE LESLIE FAY COMPANY,
                                                  INC.
                                                  
                                                  
                                                  ------------------------------
                                                  Name: John J. Pomerantz       
                                                  Title:   Chairman of the Board
                                                                                
                                       -3-        ------------------------------
                                                                   [Optionee]