AGREEMENT, GENERAL RELEASE, WAIVER AND SETTLEMENT
               -------------------------------------------------

         CONSULT WITH A LAWYER BEFORE SIGNING THIS AGREEMENT. BY SIGNING
          THIS AGREEMENT YOU GIVE UP AND WAIVE IMPORTANT LEGAL RIGHTS.

           I, Catharine Bandel Wirtshafter, understand and, of my own free will,
enter into this AGREEMENT AND GENERAL RELEASE  ("AGREEMENT") with The Leslie Fay
Company,  Inc.  and its  wholly  owned  subsidiary  Leslie Fay  Marketing,  Inc.
(collectively  referred to herein as the "COMPANY") and, in consideration of the
severance  and  termination  payment  and  benefit  (collectively   "termination
benefit") described herein, agree as follows:

           1(a). The COMPANY and I agree that my employment  with the COMPANY is
to be terminated without cause, and that I have a right to receive,  pursuant to
my Employment Agreement,  dated June 4, 1997, and for additional  consideration,
the  following  benefits,  including  a total lump sum  payment of  $159,287.22,
payable within ten (10) days of signing this agreement, as detailed on Exhibit A
attached hereto and having been adjusted as required by law.

           1(b). I further understand that I will continue to participate in all
of the Company's Employee benefit plans provided in my Employment Agreement, for
the period from January 1, 1998  through June 9, 1988,  as detailed in Exhibit B
attached hereto.  Thereafter, I will be eligible to make a COBRA election to pay
for the  continuation  of medical and dental  benefits for eighteen  months,  or
other applicable COBRA continuation period.

           1(c). I have been  advised  that the Board of Directors  has resolved
that I will be  permitted to exercise  33% of 70,040  Stock  Options,  priced at
$6.18,  at any time between the effective  date of this  Agreement and the first
anniversary thereof,  pursuant to the Stock Option Agreement dated June 4, 1997,
as amended  by the  Resolution  of the Board of  Directors,  attached  hereto as
Exhibit C.

           2. I hereby confirm that my employment with the COMPANY terminated as
of  December  9,  1997,  and I ceased  being an  employee  and an officer of the
COMPANY as of that date.

           3. I understand  that this AGREEMENT does not constitute an admission
by the COMPANY of any:  (a)  violation of any statute,  law or  regulation;  (b)
breach of contract, actual or implied; or (c) commission of any tort.

           4.  I  realize  there  are  many  laws  and  regulations  prohibiting
employment  discrimination or otherwise regulating  employment or claims related
to employment pursuant to which I may have rights or claims. These include Title
VII of the Civil  Rights Act of 1964,  as  amended;  the Age  Discrimination  in
Employment Act of 1967, as amended (the "ADEA"); the


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Americans with  Disabilities  Act of 1990; the National Labor  Relations Act, as
amended;  the Employee  Retirement Income Security Act of 1974, as amended;  the
Civil Rights Act of 1991; the Worker Adjustment and Retraining  Notification Act
("WARN").  42 U.S.C.  Section 1981 and federal,  state,  and local human rights,
fair employment and other laws. I also  understand  there are other statutes and
laws of contract and tort otherwise relating to my employment. I INTEND TO WAIVE
AND RELEASE ANY RIGHTS OR CLAIMS I MAY HAVE UNDER THESE AND OTHER LAWS, BUT I DO
NOT  INTEND TO NOR AM I WAIVING  ANY RIGHTS OR CLAIMS  THAT MAY ARISE  AFTER THE
DATE I SIGN THIS AGREEMENT.

           5(a). In exchange for my receipt of all of the  termination  benefits
provided for herein,  including  the  COMPANY's  release in paragraph  5(b),  on
behalf of myself, my heirs and personal representatives, I release and discharge
the  COMPANY  from any and all  charges,  claims and  actions  arising out of my
employment or the termination of my employment  with the COMPANY,  including but
not limited to, any claims for attorney's fees and/or expenses. I hereby settle,
waive and will  immediately  withdraw  with  prejudice  any charges,  claims and
actions that I or persons  acting on my behalf have brought  before signing this
AGREEMENT.  I agree  that I will not seek  personal  recovery  from the  COMPANY
relating to the subject matter of this paragraph 5(a).

           5(b).  In exchange  for the  execution of this release and other good
and valuable consideration,  the COMPANY releases and discharges me from any and
all charges,  claims and actions arising out of my employment or the termination
of my employment with the COMPANY,  including but not limited to, any claims for
attorney's fees and/or expenses.

           5(c).  As referred to in this  paragraph,  the COMPANY  includes  its
parents, subsidiaries,  affiliates and divisions and their respective successors
and  assigns  and  their  directors,  officers,  representatives,  shareholders,
agents, employees and their respective heirs and personal representatives.

           6. This AGREEMENT shall be deemed to have been made within the County
of New York,  State of New York,  and shall be  interpreted  and  construed  and
enforced in  accordance  with the laws of the State of New York,  and before the
Courts of the State of New York, in the County of New York.

           7. I  understand  that this  AGREEMENT  may not affect the rights and
responsibilities of the Equal Employment Opportunity  Commission  ("Commission")
to enforce the ADEA, or used to justify  interfering with the protected right of
an employee to file a charge or  participate in an  investigation  or proceeding
conducted by the Commission under the ADEA.

           8(a).  I understand  that in addition to any other  obligation I have
pursuant to this  AGREEMENT or  otherwise,  I will not in any capacity or manner
whatsoever,  either directly or indirectly, for a six (6) month period following
the effective date of this AGREEMENT, solicit any person to leave the COMPANY.


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           8(b).  I further  understand  and agree that, I will not disclose any
confidential information,  including without limitation,  information concerning
business  practices,   finances,   developments,   trade  secrets,  intellectual
property,  designs,  sketches,  patterns,  records,  data and other  proprietary
information, which I had access to during my employment with the COMPANY.

           9(a). The provisions and terms  (collectively  "provisions")  of this
AGREEMENT are severable.

           9(b).  In the  event  that  one or  more  of the  provisions  of this
AGREEMENT  shall be ruled  unenforceable  or void, the  provision(s) so affected
shall be deemed amended and shall be construed so as to enable the  provision(s)
to be applied and enforced to the maximum lawful extent.

           9(c).  My rights and the rights of the  COMPANY  referred  to in this
Paragraph  9(a)  through (c) are in  addition to any other  rights or claims the
parties may have, including,  without limitation, any rights or claims one party
may have  against  the other for breach of this  AGREEMENT.  Further,  if either
party  breaches  its release in paragraph 5, it shall pay all costs and expenses
defending against the suit incurred by the other party.

           10. I will not at any  time  talk  about,  write  about or  otherwise
publicize the terms or existence of this  AGREEMENT or any fact  concerning  its
negotiation,  execution  or  implementation,  except in the course of  obtaining
legal  and/or tax advice or to enforce the terms of this  Agreement.  I will not
testify or give evidence in any forum  concerning my  affiliation  or employment
with the COMPANY unless required by law or requested in writing by an authorized
official of the COMPANY.  Notwithstanding  the  foregoing,  if I am requested in
writing to do so by an  authorized  official of the COMPANY,  I will  reasonably
cooperate  with the COMPANY in any  investigation  it may conduct in  connection
with any events which occurred while I was an employee of the COMPANY.

           11. The COMPANY  agrees to provide me with a letter of  reference  as
attached hereto as Exhibit D. In addition,  the COMPANY also agrees to release a
statement in the form attached  hereto as Exhibit E, regarding my employment and
the  termination  thereof.  The COMPANY also agrees that it shall not  authorize
anyone to make or publish any statements which are materially  inconsistent with
those contained in Exhibits D or E.

           12. The COMPANY agrees to continue in full force and effect my rights
to  indemnification  and insurance  under the  COMPANY's  Directors and Officers
Insurance  Policies as may be applicable for my actions or inactions while I was
employed by the COMPANY, as in effect on December 9, 1997. Furthermore,  nothing
contained in this Agreement shall affect or impair my right to such indemnity or
insurance  pursuant to my Employment  Agreement,  the COMPANY's  Certificate  of
Incorporation and By Laws, or under applicable law.


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<PAGE>


           13. I  understand  that if I breach  this  AGREEMENT,  in whole or in
part, the COMPANY will suffer irreparable harm for which it may have no adequate
remedy at law. I therefore consent without limiting any other rights the COMPANY
may have, to enforcement of any provision or provisions of this AGREEMENT by the
COMPANY by means of injunctive relief.

           14. I was given a copy of this  AGREEMENT on December 9, 1997. I have
had an  opportunity  to  consult  an  attorney  and any other  advisor(s)  of my
choosing  before  signing it and was given a period of at least  twenty one (21)
days,  which is a  reasonable  period of time,  within  which to  consider  this
AGREEMENT.  I acknowledge that in signing this AGREEMENT,  I have relied only on
the promises  written in this AGREEMENT and not on any other promise made by the
COMPANY.

           15. I have seven (7) days to revoke this  AGREEMENT  after I sign it.
This AGREEMENT will not become effective or enforceable until (7) days after the
COMPANY has received my signed copy of this AGREEMENT.

           16. This AGREEMENT may not be modified or changed orally.

PLEASE WRITE THE FOLLOWING IN THE SPACE PROVIDED IF IT IS TRUE:

           I have read this AGREEMENT,  GENERAL  RELEASE,  WAIVER AND SETTLEMENT
and I  understand  all of its  terms.  I enter  into  and  sign  this  AGREEMENT
knowingly and voluntarily, with full knowledge of what it means.


            I have read this agreement,  general release,  waiver and settlement
and I  understand  all of its  terms.  I enter  into  and  sign  this  agreement
knowingly and voluntarily, with full knowledge of what it means.





By:   /s/Warren Wishart                          /s/Catherine Bandel Wirtshafter
      -----------------                          -------------------------------
      COMPANY's Representative                   EMPLOYEE's Signature


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