Exhibit - 10.64














                               SEVERANCE AGREEMENT

                                     BETWEEN

                          GOODY'S FAMILY CLOTHING, INC.

                                       AND

                                  DAVID G. PEEK



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                                TABLE OF CONTENTS


1.       Definitions....................................................1

2.       Termination of Employment......................................2

3.       Obligations of the Company Upon Termination....................3

4.       Non-exclusivity of Rights.......................................5

5.       No Duty to Mitigate.............................................5

6.       Arbitration of Disputes.........................................5

7.       Confidential Information and Nonsolicitation....................6

8.       Successors......................................................6

9.       Miscellaneous...................................................7




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106482-4 ~ 03833-0 ~ 12/02/98 ~ 09:26AM
                               SEVERANCE AGREEMENT

         THIS SEVERANCE AGREEMENT, by and between GOODY'S FAMILY CLOTHING, INC.,
a Tennessee  corporation (the "Company"),  and DAVID G. PEEK (the  "Executive"),
shall be effective as of the _16th_ day of _September, 1998.

                                    RECITALS:

     A. The  Executive  has for some time  served as Vice  President,  Corporate
Controller and Chief Accounting Officer of the Company.

         B. The Company desires to recognize the  Executive's  commitment to the
Company and to confirm the right of the Executive to certain severance benefits.
To attain  that end,  the  Company  and the  Executive  wish to enter  into this
Severance Agreement (the "Agreement").

         NOW,  THEREFORE,  in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the Company and the
Executive do hereby agree as follows:

         1.       Definitions.

                  (a)......"Accrued  Obligations" shall mean (i) the Executive's
Base Salary through the Date of  Termination,  (ii) any amounts  deferred by the
Executive and not yet paid by the Company  pursuant to a valid election to defer
the receipt of all or a portion of such  payments  made in  accordance  with any
plan of deferred compensation sponsored by the Company and any earned but unpaid
vacation pay for the current  year,  (iii) any amounts or benefits  owing to the
Executive or to the Executive's beneficiaries under the then applicable employee
benefit  plans or policies  of the  Company  and (iv) any  amounts  owing to the
Executive  for  reimbursement  of expenses  properly  incurred by the  Executive
through the Date of Termination  and which are  reimbursable  in accordance with
the reimbursement policy of the Company.

             (b)......"Board" shall mean the Board of Directors of the Company.



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106482-4 ~ 03833-0 ~ 12/02/98 ~ 09:26AM
                  (c)......"Cause"  shall mean that the  Executive  has,  in the
judgment of a majority of the Senior  Executive  Officer  Group (i)  committed a
felony,  or committed an act of fraud,  embezzlement or theft in connection with
his duties with the Company or in the course of his employment with the Company;
(ii) willfully caused damage to property of the Company; (iii) been convicted of
a criminal offense (either a misdemeanor involving acts of dishonesty,  theft or
moral turpitude,  or a felony); or (iv) engaged in a willful and material breach
of his obligations to the Company (including without limitation,  his obligation
to devote his full  business time to the business and affairs of the Company and
to  use  his  best   efforts  to  perform   faithfully   and   efficiently   the
responsibilities  assigned to him) which breach  (under this clause iv) has been
communicated to the Executive with specificity by written notice,  and which has
not been cured to the reasonable  satisfaction of the Senior  Executive  Officer
Group within a reasonable  period of time, which shall not be less than ten (10)
days, nor more than thirty (30) days,  following  receipt of such written notice
by the Executive. The Senior Executive Officer Group shall provide the Executive
with an opportunity to meet with the Senior Executive  Officer Group in order to
provide the  Executive  an  opportunity  to refute or explain  acts or omissions
referred to in such written notice. For the purpose of this paragraph, no act or
omission  shall be considered  willful  unless done or omitted to be done in bad
faith and without  reasonable  belief that such act or omission  was done in the
best interest of the Company.

     (d)......"Date of Termination"  shall have the meaning set forth in Section
2(e).

                  (e)......"Disability"   shall  mean  disability   whereby  the
Executive  is unable to render the services  provided  for by this  Agreement by
reason of illness, injury or incapacity (whether physical,  mental, emotional or
psychological)  for a period of either (i) ninety (90)  consecutive days or (ii)
one hundred eighty (180) days in any consecutive three hundred  sixty-five (365)
day period.

     (f)......"Incentive  Bonus"  shall mean the annual  incentive  target bonus
payable under the Incentive Plan.

                  (g)......"Incentive Plan" shall mean the Company's "Short Term
Incentive Plan" under which certain  employees are eligible to receive an annual
incentive  target  bonus  based on  performance  and other  specific  objectives
adopted by the Compensation Committee of the Board.

     (h)......"Notice  of  Termination"  shall have the  meaning as set forth in
Section 2(d).

     (i)......"Qualified  Plan" shall mean any retirement plan maintained by the
Company which is intended to meet the  requirements of the Internal Revenue Code
of 1986, as amended.
                  (j)......"Senior  Executive  Officer  Group"  shall  mean  the
Company's  senior vice presidents,  executive vice presidents,  president and/or
chief  operating  officer,  and chief  executive  officer,  and any other senior
executives of the Company holding  similar  positions with the Company as may be
appointed by the Board from time to time.

     (k)......"Subsidiary"  shall  mean  any  majority-owned  subsidiary  of the
Company.

     (l)......"Supplemental Payment Date" shall have the meaning as set forth in
Section 3(c).

         2.       Termination of Employment.



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                  (a)......Disability;  Death.  The  Company may  terminate  the
Executive's employment after having established the Executive's  Disability,  by
giving  to the  Executive  written  notice of its  intention  to  terminate  his
employment, and his employment with the Company shall terminate effective on the
thirtieth (30th) day after receipt of such notice if the Executive shall fail to
return to full-time performance of his duties within thirty (30) days after such
receipt. If the Executive dies during the term of this Agreement, his employment
hereunder shall be deemed to cease as of the date of his death.

                  (b)......Voluntary     Termination     by    the    Executive.
Notwithstanding  anything in this Agreement to the contrary,  the Executive may,
upon not less than thirty (30) days' written notice to the Company,  voluntarily
terminate employment for any reason (including retirement under the terms of the
Company's retirement plan as in effect from time to time).

     (c)......Termination  by the Company. The Company at any time may terminate
the Executive's employment for Cause or without Cause.

                  (d)......Notice of Termination. Any termination by the Company
for Cause shall be  communicated by a written Notice of Termination to the other
party  hereto  given in  accordance  with  Section  9(c).  For  purposes of this
Agreement, a "Notice of Termination" means a written notice given in the case of
a termination for Cause which (i) indicates the specific  termination  provision
in this Agreement  relied upon,  (ii) sets forth in reasonable  detail the facts
and circumstances  claimed to provide a basis for termination of the Executive's
employment,  and (iii) if the termination date is other than the date of receipt
of such notice,  specifies  the  termination  date (which date shall be not more
than thirty (30) days after the receipt of such notice).

                  (e)......Date   of  Termination.   For  the  purpose  of  this
Agreement, the term "Date of Termination" means (i) in the case of a termination
for Cause, the date of receipt of a Notice of Termination or, if later, the date
specified  therein,  and (ii) in all other  cases,  the actual date on which the
Executive's employment terminates.

         3. Obligations of the Company Upon Termination. Upon termination of the
Executive's  employment  with the Company,  the Company shall have the following
obligations:



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                  (a)......Death,  Disability and Retirement. If the Executive's
employment is  terminated by reason of the  Executive's  death,  Disability,  or
retirement on or after the attainment of age sixty-five  (65), the Company shall
have no further obligations to the Executive's legal  representatives under this
Agreement  other than  payment of the Accrued  Obligations.  If the  Executive's
employment is terminated by reason of the Executive's  death or Disability,  the
Company  shall  have the  additional  obligation,  subject  to the  terms of the
Incentive Plan and further  provided that the Executive has been employed by the
Company for the first six (6) months of the then applicable  fiscal year, to pay
a cash  amount  equal to a portion  of the  Incentive  Bonus,  the  product of a
fraction,  the  numerator of which is the number of days elapsed  since the date
the Incentive Plan began for the applicable  fiscal year through the date of the
Disability or the date of death of the Executive,  and the  denominator of which
is the total  number of days of the  applicable  fiscal year for such  Incentive
Plan.  Unless  otherwise  directed  by the  Executive  (or,  in the  case of the
Incentive Plan or a Qualified Plan, as may be required by such Incentive Plan or
Qualified  Plan) all Accrued  Obligations  shall be paid to the  Executive,  his
beneficiaries or his estate, as applicable,  in a lump sum in cash within thirty
(30) days of the Date of Termination.

                  (b)......Termination  by the Company  for Cause and  Voluntary
Termination by the Executive.  If the Executive's employment shall be terminated
for Cause or voluntarily terminated by the Executive,  the Company shall pay the
Executive the Accrued Obligations.  The Executive shall be paid all such Accrued
Obligations  in a lump  sum in cash  within  thirty  (30)  days  of the  Date of
Termination  and the Company shall have no further  obligations to the Executive
under this Agreement, unless otherwise required by a Qualified Plan or specified
pursuant  to a valid  election  to defer the receipt of all or a portion of such
payments made in accordance with any plan of deferred compensation  sponsored by
the Company.

                  (c)......Other  Termination  of  Employment.  If  the  Company
terminates the Executive's employment other than for Cause, death or Disability,
the Company shall pay and provide to the Executive the following:

     (i) Severance Payment. The Company shall pay to the Executive in a lump sum
in  cash  or  certified  check  within  fifteen  (15)  days  after  the  Date of
Termination a severance payment equal to the sum of the following amounts (other
than amounts payable from the Incentive Plan or Qualified  Plans,  non-qualified
retirement plans and deferred compensation plans, which amounts shall be paid in
accordance with the terms of such plans):

                                    (A)     all Accrued Obligations;

     (B) a cash amount equal to three (3) months of the Executive's  Base Salary
at the rate in effect as of the date when the Notice of Termination was given;

     (C) subject to the terms of the  Incentive  Plan and further  provided that
the  Executive  has been employed by the Company for the first six (6) months of
the then  applicable  fiscal  year,  a cash  amount  equal to a  portion  of the
Incentive Bonus, the product of a fraction, the numerator of which is the number
of days  elapsed  since the date the  Incentive  Plan  began for the  applicable
fiscal  year  through  the  date  of such  termination  without  Cause,  and the
denominator of which is the total number of days of the  applicable  fiscal year
for such Incentive Plan.


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     In addition, if the Executive has not accepted employment from a subsequent
employer prior to the date which is four (4) months from the Date of Termination
(the "Supplemental  Payment Date"),  commencing on the Supplemental Payment Date
the Company  shall pay the  Executive an amount equal to fifty  percent (50%) of
his monthly  Base Salary at the rate in effect as of the date when the Notice of
Termination was given in equal monthly installments until the earlier of (i) the
payment  of the  third  (3rd)  monthly  installment  or  (ii)  the  date  of the
Executive's  acceptance of employment from a subsequent employer.  The Executive
shall  notify  the  Company  immediately  upon  his  acceptance  of any such new
employment  if secured  prior to the  payment  by the  Company of such three (3)
additional monthly installments.

                  (d)......Release.  As a condition  precedent to the receipt of
any  termination  benefits  payable to the  Executive  under this Section 3, the
Executive  agrees to execute a general release among other things  releasing the
Company from any obligation or liability (other than those contained in Sections
3, 6, 8 and 9 hereof, to the extent an obligation under such section arose at or
prior to the Date of Termination  and remains  unfulfilled).  Such release shall
exclude the Executive's rights under any Qualified Plan.

                  (e)......Discharge  of Company's  Obligations.  Subject to the
performance of its  obligations  under Sections 3, 6, 8 and 9 (and then, only to
the extent an  obligation  under such  section  arose at or prior to the Date of
Termination  and  remains  unfulfilled),  the  Company  shall  have  no  further
obligations to the Executive  under this Agreement in respect of any termination
of employment.

         4.  Non-exclusivity of Rights.  Nothing in this Agreement shall prevent
or limit the  Executive's  continuing  or future  participation  in any benefit,
bonus,  incentive or other plan or program provided by the Company and for which
the  Executive  may  qualify,  nor  shall  anything  herein  limit or  otherwise
prejudice such rights as the Executive may have under any other  agreements with
the  Company,  including,  but not limited to stock option  agreements.  Amounts
which are vested  benefits  or which the  Executive  is  otherwise  entitled  to
receive under any plan or program of the Company at or subsequent to the Date of
Termination shall be payable in accordance with such plan or program.

         5. No Duty to Mitigate.  The  Executive  shall not be obligated to seek
other  employment by way of  mitigation of the amounts  payable to the Executive
under any of the provisions of this Agreement.

         6.  Arbitration  of Disputes.  In the event that a claim for payment or
benefits under this Agreement is disputed,  the Company and the Executive  agree
to submit such  dispute to final and  binding  arbitration  with  United  States
Arbitration and Mediation,  Inc. ("USAM") in Knoxville,  Tennessee or such other
arbitration  firm as the Company and the Executive shall mutually agree.  Either
party wishing to arbitrate any claim  hereunder shall notify the other party and
USAM in writing  whereupon  USAM  shall  select a neutral  arbitrator  and shall
schedule  an  arbitration  hearing  within  thirty  (30) days of receipt of such
notice of arbitration. The arbitration shall be conducted in accordance with the
rules and procedures of USAM. The parties agree that any arbitrator's  award may
be presented to a court of competent jurisdiction and judgment entered thereon.

         7.       Confidential Information and Nonsolicitation.



<PAGE>


                  (a)......The  Executive shall hold in a fiduciary capacity for
the benefit of the Company all secret or confidential information,  knowledge or
data,  including without limitation all trade secrets,  relating to the Company,
and its  business,  (i) obtained by the Executive  during his  employment by the
Company, and (ii) which is not otherwise publicly known (other than by reason of
an  unauthorized  act by the  Executive)  and is  subject  to  efforts  that are
reasonable under the circumstances to maintain its secrecy. After termination of
the Executive's  employment with the Company,  the Executive shall not,  without
the prior written consent of the Company,  unless compelled pursuant to an order
of a court or other body having  jurisdiction  over such matter,  communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it.

                  (b)......Upon  termination of the  Executive's  employment for
any reason, the Executive, for the twelve (12) month period following the Notice
of  Termination,  shall  not,  on his own  behalf or on behalf of any  person or
entity,  directly  or  indirectly  solicit  or aid in  the  solicitation  of any
employees of the Company to leave their  employment.  In the event the Executive
violates  the terms of Section  7(a) or this Section  7(b),  the Employee  shall
forfeit  the right to all  salary and  benefits  that the  Executive  and/or his
family members were otherwise entitled pursuant to the terms of Section 3. Also,
in the event that this Section 7 is determined to be  unenforceable  in part, it
shall be construed to be enforceable to the maximum extent permitted by law.

                  (c)......The   Executive   agrees   that  the   covenants   of
confidentiality and non-solicitation  contained in this Section 7 are reasonable
covenants  under  the  circumstances  and  necessary  to  protect  the  business
interests and properties of the Company.  The Executive  agrees that irreparable
loss and damage will be suffered by the Company should the Executive  breach any
of the covenants contained in this Section 7. Accordingly,  the Executive agrees
that the  Company,  in  addition to all  remedies  provided at law or in equity,
shall be entitled to a temporary  restraining  order and temporary and permanent
injunctions to prevent a breach or  contemplated  breach of any of the covenants
contained in this Section 7.

         8.       Successors.

                  (a)......This  Agreement  is  personal to the  Executive  and,
without the prior written consent of the Company, shall not be assignable by the
Executive  otherwise than by will or the laws of descent and distribution.  This
Agreement  shall inure to the benefit of and be enforceable  by the  Executive's
legal representatives.

                  (b)......This  Agreement  shall inure to the benefit of and be
binding  upon the Company and its  successors.  The  Company  shall  require any
successor  to all or  substantially  all of the  business  and/or  assets of the
Company,  whether  direct  or  indirect,  by  purchase,  merger,  consolidation,
acquisition  of stock,  or  otherwise,  expressly to assume and agree to perform
this Agreement in the same manner and to the same extent as the Company would be
required to perform if no such succession had taken place.


<PAGE>


         9.       Miscellaneous.

                  (a)......Applicable  Law. This Agreement  shall be governed by
and  construed in accordance  with the laws of the State of  Tennessee,  applied
without reference to principles of conflict of laws.

                  (b)......Amendments.  This  Agreement  may not be  amended  or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.

                  (c)......Notices.   All  notices   and  other   communications
hereunder  shall be in writing and shall be given by hand  delivery to the other
party, by overnight  delivery or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:

         If to the Executive:     at the address listed on the last page hereof

         If to the Company:         Goody's Family Clothing, Inc.
                                    400 Goody's Lane
                                    P.O. Box 22000
                                    Knoxville, Tennessee 37933-2000
                                    Attention: General Counsel

(with a copy to the  attention  of the  Secretary  or to such  other  address as
either  party  shall  have  furnished  to the  other in  writing  in  accordance
herewith).  Communications  delivered by hand or by overnight  delivery shall be
deemed received on the date of delivery and communications sent by registered or
certified  mail  shall be deemed  received  three (3)  business  days  after the
sending thereof.

                  (d)......Tax  Withholding.  The Company may withhold  from any
amounts payable under this Agreement such federal, state or local taxes as shall
be required to be withheld pursuant to any applicable law or regulation.

                  (e)......Severability.  The invalidity or  unenforceability of
any provision of this Agreement shall not affect the validity or  enforceability
of any other provision of this Agreement.

     (f)......Captions.  The  captions  of this  Agreement  are not  part of the
provisions hereof and shall have no force or effect.

<PAGE>


                  (g)......Entire Agreement. This Agreement expresses the entire
understanding  and agreement of the parties  regarding the terms and  conditions
governing the Executive's  employment with the Company, and all prior agreements
governing  the  Executive's  employment  with the Company  shall have no further
effect;  provided,  however,  that except as specifically  provided herein,  the
terms of this  Agreement do not supersede the terms of any grant or award to the
Executive under any stock option or profit sharing program of the Company.


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                                                         9
106482-4 ~ 03833-0 ~ 12/02/98 ~ 09:26AM
         IN WITNESS  WHEREOF,  the  Executive  has hereunto set his hand and the
Company has caused this Agreement to be executed in its name on its behalf,  and
its corporate  seal to be hereunto  affixed and attested by its  Secretary,  all
effective as of the day and year first above written.

                          GOODY'S FAMILY CLOTHING, INC.


                            By:____/s/ Harry M. Call________________
                                  Harry M. Call
                               Title:   President and Chief Operating Officer
ATTEST:

_______/s/ Regis J. Hebbeler____________
         Regis J. Hebbeler
Title:___Assistant Secretary_____________

(CORPORATE SEAL)

                            EXECUTIVE: David G. Peek

                                            _____/s/ David G. Peek____________
                                            Name:  David G. Peek

                                            Address: