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On April 23, 2010, the Compensation Committee of Cherokee Inc. ("Cherokee") authorized the execution and delivery on behalf of Cherokee of the Second Amendment (the "Proposed Amendment") to the Second Revised and Restated Management Agreement between Cherokee and The Newstar Group d/b/a The Wilstar Group ("Wilstar") dated as of November 29, 1999, and as amended on August 28, 2007 pursuant to the First Amendment to the Second Revised and Restated Management Agreement (the "Management Agreement"), pursuant to which Robert Margolis provides his management services as Cherokee's Chief Executive Officer and Chairman of Cherokee's Board of Directors. On April 23, 2010, Cherokee and Mr. Margolis executed the Proposed Amendment. The effectiveness of the Proposed Amendment is contingent upon stockholder approval at the 2010 Annual Meeting of the Stockholders, which is currently scheduled for June 4, 2010 (the "Annual Meeting"). In addition, Cherokee has filed a preliminary proxy statement on Schedule 14A with the Securities and Exchange Commission (the "SEC") on April 23, 2010 in connection with the vote of Cherokee's stockholders regarding the Proposed Amendment at, and other matters related to, the Annual Meeting (the "Preliminary Proxy Statement"). Cherokee expects to file a definitive proxy statement on Schedule 14A with the SEC in connection with the Annual Meeting and may file other solicitation material in connection therewith (the "Definitive Proxy Statement"). Stockholders are urged to read the Preliminary Proxy Statement and the Definitive Proxy Statement and other relevant documents filed with the SEC when available carefully because they will contain important information. The material terms of the Management Agreement and the Proposed Amendment are summarized below.

Mr. Margolis' management services as Cherokee's Chairman of the Board of Directors and Chief Executive Officer are provided pursuant to the Management Agreement.

Mr. Margolis has received the base salary and performance bonus payments for the fiscal years included in the table below under the current terms of the Management Agreement. Mr. Margolis' base salary is subject to adjustment annually based on a local consumer price index under the terms of the existing Management Agreement, and Mr. Margolis' performance bonus is calculated based on Cherokee's annual financial performance in accordance with footnote (1) to the table below. For Cherokee's fiscal year ending January 29, 2011 ("Fiscal 2011"), Mr. Margolis is expected to receive a performance based bonus similar to what he received for Cherokee's Fiscal year ended January 30, 2010 ("Fiscal 2010"), based upon the results for Fiscal 2011, and irrespective of whether the Proposed Amendment is adopted. If the existing Management Agreement is extended for Cherokee's fiscal year ending January 31, 2012 ("Fiscal 2012") as a result of Cherokee's financial performance for Fiscal 2011, Mr. Margolis' base salary is subject to increase and Mr. Margolis' performance bonus for Fiscal 2012 will be calculated in accordance with footnote (1) below based on Cherokee's financial performance for Fiscal 2012. However, if the Proposed Amendment is adopted, for Fiscal 2012 the total base salary and performance bonus compensation payable to Mr. Margolis would not exceed $2.26 million and for each fiscal year thereafter in which Mr. Margolis serves as Cherokee's Executive Chairman, the performance bonus would be capped such that the total base salary and performance bonus compensation payable to Mr. Margolis would not exceed $2.02 million.

(1) The Management Agreement provides for payment of an annual performance bonus for each fiscal year in which Cherokee's EBITDA is at least $5.0 million equal to (x) 10% of Cherokee's EBITDA for such fiscal year in excess of $2.5 million up to $10.0 million, plus (y) 15% of Cherokee's EBITDA for such fiscal year in excess of $10.0 million.

(2) If the Proposed Amendment is approved by Cherokee's stockholders, Mr. Margolis' base salary for Fiscal 2012 and in any Subsequent Chair Service Periods (as defined below) will remain at $804,000, and the performance bonus payable to Mr. Margolis will be calculated in accordance with the formula noted in footnote (1) above, subject to a maximum amount of: (i) $2.26 million in total compensation for Fiscal 2012 from base salary and the performance bonus, and (ii) $2.02 million in total compensation from base salary and the performance bonus for any future fiscal year in which the Management Agreement is extended. In addition, if Cherokee's stockholders approve the Proposed Amendment at the Annual Meeting, Mr. Margolis will receive a five-year non-qualified, non-plan stock option to purchase 100,000 shares of Cherokee's common stock with an exercise price equal to the closing market price on the Stockholder Approval Date (as defined below), and vesting in two equal installments on January 31, 2011 and January 31, 2012.

Without giving effect to the Proposed Amendment, the Management Agreement will terminate at the end of Fiscal 2011 unless Cherokee's consolidated pre-tax earnings for Fiscal 2011 (setting aside certain extraordinary transactions and related expenses as described in the Management Agreement) as set forth in its audited financial statements: (a) are no less than 80% of the consolidated pre-tax earnings contained in the budget submitted to and approved by the Compensation Committee for Fiscal 2011, and (b) are also no less than the consolidated pre-tax earnings for Fiscal 2010 (the "Extension Threshold"). If such financial benchmarks are met, however, and without giving effect to the Proposed Amendment, the Management Agreement will automatically extend for Fiscal 2012, and a similar test will be applied in determining whether or not the Management Agreement will extend for Fiscal 2013, and in each year thereafter assuming the Management Agreement continues to extend for additional fiscal years. There may be any number of such extensions if the foregoing tests are met for each applicable fiscal year.

Given the current economic climate and Cherokee's anticipated results for Fiscal 2011, it is reasonably likely that, unless the Proposed Amendment is approved by stockholders, the Management Agreement may terminate on February 1, 2011, as pre-tax income for Fiscal 2011 may not exceed pre-tax income of Fiscal 2010. Conversely, it is also possible that the existing Management Agreement will be extended to February 1, 2012 in the event that the financial benchmarks for Fiscal 2011 to extend the existing Management Agreement are met, thereby allowing Mr. Margolis to be eligible for base salary and performance bonus compensation that significantly exceeds the total base salary and performance bonus compensation that Mr. Margolis will be eligible to receive as a result of the Proposed Amendment. If Cherokee's stockholders approve the Proposed Amendment, then the Management Agreement will be automatically extended by one year to February 1, 2012, and Mr. Margolis will serve as Executive Chairman only during Fiscal 2012 and in any Subsequent Chair Service Periods. The foregoing table above documents the historical bonus compensation previously earned by Mr. Margolis, and the maximum amount of base and bonus compensation that can be earned in Fiscal 2012 of $2.26 million or in any Subsequent Chair Service Periods of $2.02 million in the event that the Proposed Amendment is adopted.

Without giving effect to the Proposed Amendment, the Management Agreement provides Mr. Margolis shall serve as the Chairman of Cherokee's Board of Directors and provides Mr. Margolis with certain rights to designate one or more additional members of Cherokee's Board of Directors (an "Investor Director"). Mr. Margolis has waived all of his rights under the Management Agreement with respect to the nomination, election or appointment of an Investor Director to the Board of Directors until Cherokee's 2011 annual meeting of stockholders.

Mr. Margolis may terminate the Management Agreement if Cherokee materially breaches any of the terms and conditions of the Management Agreement or fails to perform its material obligations thereunder, as set forth in the Management Agreement. In addition, Cherokee's Board of Directors may terminate the Management Agreement at any time with or without cause, as set forth in the Management Agreement. The Management Agreement will terminate immediately upon Mr. Margolis' death and may be terminated by the Board of Directors if Mr. Margolis fails to render services to Cherokee for a substantially continuous period of six months because of Mr. Margolis' physical or mental disability during such period.

Payments to Mr. Margolis if the Management Agreement is Terminated

In addition to certain payments that are payable to Mr. Margolis in the event the Management Agreement is terminated for any reason by either Cherokee or by Mr. Margolis (including accrued base salary, accrued performance bonus, reimbursement of all expenses, and ongoing indemnification and insurance coverage), if Cherokee terminates the existing Management Agreement without cause or if Mr. Margolis terminates the Management Agreement as a result of Cherokee's breach, including following a change in control, Cherokee will pay Mr. Margolis a lump sum in cash equal to three times the sum of (a) Mr. Margolis' base compensation at the rate in effect at the date of the termination and (b) the performance bonus paid to Mr. Margolis for the preceding fiscal year (the "Termination Payment"). Mr. Margolis' current annual base compensation (in Fiscal 2011) is $804,000 and his performance bonus for Fiscal 2010 was approximately $2.5 million. For Fiscal 2011, and irrespective of whether the Proposed Amendment is adopted by Cherokee's stockholders, the Termination Payment, if applicable, will be calculated in accordance with the foregoing and would entitle Mr. Margolis to a lump sum payment of approximately $10.0 million based on Mr. Margolis' current base salary and Fiscal 2010 performance bonus. In the event that the Proposed Amendment is not adopted, the Termination Payment would be similarly calculated for Fiscal 2012 in the event that the existing Management Agreement is extended to January 31, 2012 as a result of Cherokee's financial performance for Fiscal 2011. However, for Fiscal 2012, the total amount payable to Mr. Margolis in the case of such events will be fixed at $6,000,000 in the event that the Proposed Amendment is approved by Cherokee's stockholders and no such amount shall be payable as a result of the occurrence of such events in a Subsequent Chair Service Period (other than the case in which a change of control is consummated in a Subsequent Chair Service Period as a result of a definitive agreement executed by Cherokee during the Initial Chair Service Period (as defined below)).

Cap on Payments Contingent on a Change in Control

If any payments to Mr. Margolis under the Management Agreement are determined to result in the non-deductibility of some or all of such payments under Section 280G of the Code, the payments to Mr. Margolis will be reduced to the maximum amount that is payable without causing such payments to be nondeductible by Cherokee.

The foregoing description of the Management Agreement is not complete and is qualified in its entirety by full text of the Management Agreement, which is attached hereto as Exhibits 10.1 and 10.2 and is incorporated herein by reference.

The Proposed Amendment effects the following principal changes to the Management Agreement, which are to become effective as of the date that Cherokee's stockholders approve the Amendment (currently scheduled for June 4, 2010) (the "Stockholder Approval Date"):

The Proposed Amendment, if approved by Cherokee's stockholders, would eliminate the existing provision regarding the Extension Threshold and automatically extend the term of the Management Agreement by one year, to February 1, 2012, whether or not the Extension Threshold is achieved during Fiscal 2011. On February 1, 2011, Mr. Margolis shall cease to be Chief Executive Officer of Cherokee, and he shall be appointed and serve as Executive Chairman of Cherokee's Board of Directors from that date until January 31, 2012 (or such earlier date as Mr. Margolis voluntarily resigns or becomes unable to serve due to his death or disability).  (The foregoing period during which Mr. Margolis serves as Executive Chairman is hereinafter referred to as the "Initial Chair Service Period".)  In January 2012, and in January of any Subsequent Chair Service Period (as defined below), Cherokee's Nominating Committee, which shall then be comprised of all of the independent directors (as that term is defined under the rules of the Nasdaq Stock Market) then serving on Cherokee's Board of Directors, shall meet and determine in its sole discretion whether to elect (by majority approval) to extend Mr. Margolis' service as Executive Chairman for the following fiscal year. Any such period following the Initial Chair Service Period during which the Nominating Committee has elected to extend Mr. Margolis' service as Executive Chairman is referred to herein as a "Subsequent Chair Service Period". During the Initial Chair Service Period and any Subsequent Chair Service Period, Mr. Margolis shall remain an employee of Cherokee and shall perform such services and have such executive powers as are reasonable and necessary to carry out the responsibilities assigned to him by the Board of Directors.

New Section 3.6 - Compensation During and Following Initial Chair Service Period and any Subsequent Chair Service Period

The Proposed Amendment adds a new Section 3.6 to the Management Agreement, which provides for a maximum amount of $2.26 million in total base salary and bonus compensation payable to Mr. Margolis during the Initial Chair Service Period, and for a maximum of $2.02 million in total base salary and performance bonus compensation payable to Mr. Margolis during any Subsequent Chair Service Period. During the Initial Chair Service Period and in any Subsequent Chair Service Periods, Mr. Margolis' base salary will be $804,000. The performance bonus shall continue to be calculated through the formulas as currently described in the Management Agreement, but the performance bonus is limited to a maximum of $1.456 million in Fiscal 2012, and $1.216 million in any Subsequent Chair Service Period as a result of the limits on overall base salary and bonus compensation of $2.26 million for the Initial Chair Service Period and $2.02 million in any Subsequent Chair Service Period. Such compensation shall be reduced pro rata in the event that Mr. Margolis voluntarily resigns or becomes unable to serve on the Board of Directors due to his death or disability after (i) in the case of the Initial Chair Service Period, January 31, 2011 but prior to January 31, 2012 or (ii) in the case of any Subsequent Chair Service Period, the beginning of such Subsequent Chair Service Period but prior to the last day of the fiscal year corresponding to such Subsequent Chair Service Period. Following Mr. Margolis' service as Executive Chairman pursuant to the Management Agreement and for so long as Mr. Margolis continues to serve as a member of Cherokee's Board of Directors, he shall be entitled to participate in Board compensation programs consistent with other members of the Board of Directors.

New Section 3.7 - Equity Compensation

The Proposed Amendment adds a new Section 3.7 to the Management Agreement, which provides for the grant to Mr. Margolis of a five-year non-qualified, non-plan option to purchase 100,000 shares of the Cherokee's common stock on the Stockholder Approval Date, if so approved. The exercise price per share will be equal to the closing sale price of the common stock on the Stockholder Approval Date. The option shall vest contingent on Mr. Margolis' continued service as a member of the Board of Directors in two equal installments, on January 31, 2011 and January 31, 2012, and will be accelerated in the event that Cherokee experiences a change in control. The option shall be exercisable until the fifth anniversary of the Stockholder Approval Date.

The Proposed Amendment provides that, during the Initial Chair Service Period, if Cherokee consummates a change in control or enters into a definitive agreement that results in a change in control following the Initial Chair Service Period, or if the Management Agreement is terminated by Cherokee without cause or by Mr. Margolis in the event that Cherokee breaches its obligations under the Management Agreement (each, an "Early Termination Event"), then Mr. Margolis shall be entitled to a payment of $6.0 million in lieu of (and in full satisfaction of) the payments that might otherwise be due to him pursuant to the Management Agreement (such payment, the "Early Termination Payment"). Cherokee shall not be obligated to pay the Early Termination Payment to Mr. Margolis under the Management Agreement if any of such Early Termination Events occurs following the Initial Chair Service Period, whether or not Mr. Margolis' service as Executive Chairman is extended for one or more Subsequent Chair Service Periods (other than the case in which a change of control is consummated in a Subsequent Chair Service Period as a result of a definitive agreement executed by Cherokee during the Initial Chair Service Period).

The Proposed Amendment provides that Cherokee shall be permitted to assign the Management Agreement without the consent of Wilstar following the conclusion of the Initial Chair Service Period.

The foregoing description of the Proposed Amendment is not complete and is qualified in its entirety by the Second Amendment to the Management Agreement, which attached hereto as Exhibit 10.3 and is incorporated herein by reference.

(d) Exhibits.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT 10.3

IN WITNESS WHEREOF, each of the Parties has executed this Amendment on the date first written above.

By: /s/ Robert Margolis By: /s/ Russell J. Riopelle

Name: Robert Margolis Name: Russell J. Riopelle

Title: President Title: Chief Financial Officer

[SIGNATURE PAGE TO SECOND AMENDMENT TO

THE SECOND REVISED AND RESTATED MANAGEMENT AGREEMENT]