**Exhibit 10.1**

 
| ** **             | ** ** | **UBS Financial Services Inc.**    |
|------------------------|------------|------------------------------------|
| UBS                    |       | 1200 Harbor Boulevard              |
|                   |       | Weehawken, NJ 07086                |
|                   |       |                               |
|                   |       | James M. Pierce                    |
|                   |       | Co-Head                            |
|                   |       | Wealth Management Advisor Group US |
|                   |       |                               |
|                   |       | James D. Price                     |
|                   |       | Co-Head                            |
| CITI TRENDS, INC.      |       | Wealth Management Advisor Group US |
| 102 FAHM STREET        |       |                               |
| SAVANNAH GA 31401-2392 |       | www.ubs.com                        |
|                   |       |                               |
|                   |       | October 8, 2008               |
|                   |       |                               |
|                   |       | Branch Telephone Number            |
|                   |       | +1-312-525-4500                    |
|                   |       |                               |
|                   |       | Account Number: CP  73472          |

 

We are pleased to offer you a way to liquidate certain of your auctionrate securities (ARS). UBS has designed a solution that gives you the option tohold your ARS or sell the securities back to UBS. This solution is availablefor ARS that were held in a UBS account on February 13, 2008, and that arenot successfully clearing at auction (Eligible ARS).

 

**UBS is offering you “Auction Rate Securities Rights”(Rights) to sell Eligible ARS at par value to UBS at any time during a two-yeartime period. These Rights are nontransferable securities registered with theU.S. Securities and Exchange Commission (SEC). This is a limited time offerthat will expire on November 14, 2008. Accepting this offer may impactyour legal rights. Not accepting this offer may have repercussions onoutstanding loans secured by Eligible ARS. As a result, it is important that youreview the prospectus carefully.**

 

The key features and terms of the offer are summarized below. Forcomplete details, please see the enclosed prospectus.

 

·        UBS is offering you nontransferable Rights to sell Eligible ARS, heldin the UBS account identified above, at par value to UBS at any time during theperiod of June 30, 2010, through July 2, 2012.

 

·         You may instruct your UBS Financial Advisor to exercise these Rights atany time during this time period;

·         If you do not exercise your Rights, the Eligible ARS will continue toaccrue interest or dividends as determined by the auction process;

·         If you do not exercise your Rights before July 2, 2012, they willexpire and UBS will have no further obligation to buy your Eligible ARS.

 

·        Clients who accept this offer give UBS the discretion to purchase orsell their Eligible ARS at any time after accepting the firm’s offer andwithout other prior notice.

 

·         UBS will purchase tax-exempt Auction Preferred Stock (a specific typeof ARS also known as APS) at any time after clients accept the firm’s Rightsoffer;

·         UBS will only exercise its discretion to purchase or sell Eligible ARSfor the purpose of restructurings, dispositions or other solutions that willprovide clients with par value for their Eligible ARS;

·         In purchasing Eligible ARS or selling Eligible ARS on behalf ofclients, including tax-exempt APS, UBS will act in its capacity asbroker-dealer and will execute these transactions on a principal basisregardless of the type of client accounts in which the Eligible ARS are held.Please see pages 27-28 in the enclosed prospectus for more information;

·         UBS will pay clients par value for their Eligible ARS within one day ofsettlement of the transaction;

·         Eligible ARS are subject to issuer redemptions at any time.

 

UBS AG has filed a registration statement (including a prospectus) withthe SEC for the offering to which this communication relates. Before you makean investment decision, you should read the prospectus in that registrationstatement and other documents that UBS has filed with the SEC for more completeinformation about UBS and this offering. You may get these documents for freeby visiting EDGAR on the SEC Web site at *www.sec.gov*or by calling UBS’sARS Client Service Center at +1-800-253-1974.

** **
| **UBS Financial Services Inc. and  UBS International Inc. are subsidiaries of UBS AG.** | ** ** | **1C-ARSO** |
|-----------------------------------------------------------------------------------------|------------|-------------|

 

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UBS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  **UBS Financial Services Inc.**

 

·        Clients who accept this offer release UBS andits employees/agents from all claims except claims for consequential damages directly or indirectly relating to itsmarketing and sale of ARS and expressly agree not to seek any damages or costs(punitive damages, attorney fees, etc.) other than consequential damages.Clients also will not serve as a class representative or receive benefits underany class action settlement or investor fund.

 

·        UBS will provide clients who accept the offer “no net cost” loans up tothe par value of Eligible ARS until June 30, 2010. Please see pages 36-39in the enclosed prospectus for more information.

 

·        UBS will reimburse all clients who participated in prior UBS ARS loanprograms after February 13, 2008, for the difference between thecost of the loan and the applicable interest paid on the Eligible ARS.

 

**THIS OFFER EXPIRES ON NOVEMBER 14, 2008.**Pleasecomplete, sign and date the enclosed form and return it in the postage-paidenvelope if you wish to accept this offer. We must **receive**your signed acceptance form nolater than November 14, 2008.

 

**You may receive multiple letters from us depending onthe type of ARS you own or if you have ARS in multiple accounts. Please noteyou must return a form for each letter you receive to accept allavailable offers relating to your ARS holdings. Please read each response formcarefully as the terms may vary.**

 

A list of yourEligible ARS in the account identified on the first page of this letter isattached. Additional information about your Eligible ARS, including the mostrecent interest rates and dividend yields, is available at *www.ubs.com/auctionratesecurities.*

 

If you have anyquestions about your Eligible ARS or this offer, please contact your UBSFinancial Advisor or Branch Manager at the telephone number listed at the topof this letter. Please note that UBS Financial Advisors and Branch Managerscannot provide legal or tax advice regarding this offer. Instructions toexercise your Rights should be directed to your UBS Financial Advisor or BranchManager.

 

We regret anyhardship that the failure of the ARS markets may have caused you. We hope thatthe offer described above and discussed in detail in the prospectus providesresolution for you regarding this matter. We look forward to continuing ourrelationship with you and to serving your future investment needs.

 

Thank you for yourbusiness and for maintaining your relationship with UBS.

 
| Sincerely,          |           |
|---------------------|----------------|
|                |           |
|                |           |
| /s/ James M. Pierce |           | /s/ James D. Price |
| James M. Pierce     | James D. Price |
|                     |                |  |

 

UBS Financial Services Inc. serves as the clearing firm for UBSInternational Inc. Accordingly, the information and terms contained in thisletter and the accompanying materials are directed to clients of both UBSFinancial Services Inc and UBS International Inc.

 

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Current rate and dividend information

 

Toallow you to view the current interest rates and/or dividends your holdings areearning, we have created an online tool available at *www.ubs.com/auctionratesecurities.*

 

Simplyenter the nine-digit CUSIP number(s) shown below to obtain the mostcurrent information about your securities.

 

Percentagesdisplayed in the descriptions below are as of September 30, 2008.

 
| **CUSIP** | ** ** | **Description**               | ** ** | **CUSIP**  | ** ** | **Description**                | ** ** | **CUSIP** | ** ** | **Description**                |
|-----------|------------|-------------------------------|------------|------------|------------|--------------------------------|------------|-----------|------------|--------------------------------|
| 155488BV0 |       | CENTRAL TEXAS HGHR ED AU      |       | 429825AT9  |       | NEW JERSEY HGR ED STU-LN       |       | 462590FR6 |       | IOWA STUD LN LIQ SER A         |
|      |       | SER 2002A REV AMT B/E/R/      |       |       |       | SER C REV MBIA AMT BE/R/       |       |      |       | REV AMBAC AMT B/E /R/          |
|      |       | VARIABLE RATE                 |       |       |       | VARIABLE RATE                  |       |      |       | VARIABLE RATE                  |
|      |       | RATE 12.000% MATURES 12/01/36 |       |       |       | RATE 08.540% MATURES  06/01/37 |       |      |       | RATE 08.540% MATURES  12/01/38 |
|      |       |                          |       |       |       |                           |       |      |       |                           |
| 462590GA2 |       | IA STDT LN LIQ 35DAY ARC      |       | 462590GB0  |       | IOWA STUD LN LIQ ARC           |       | 49130NAV1 |       | KENTUCKY HIGHER ED STUD        |
|      |       | AMBAC SR C-II AMT BE/R/       |       |       |       | (WED) 06 SER 1 AMT BE/R/       |       |      |       | LN ARC REV AMT B/E /R/         |
|      |       | VARIABLE RATE                 |       |       |       | VARIABLE RATE                  |       |      |       | VARIABLE RATE                  |
|      |       | RATE 08.540% MATURES 12/01/40 |       |       |       | RATE 08.540% MATURES  12/01/30 |       |      |       | RATE 08.540% MATURES  06/01/34 |
|      |       |                          |       |       |       |                           |       |      |       |                           |
| 49130NAX7 |       | KENTUCKY HIGHER ED STUD       |       | 49130NBK4  |       | KENTUCKY HGHR ED STUD LN       |       | 57563REE5 |       | MA ED FIN AU ISS 2002 RV       |
|      |       | REV ARC A AMT B/E /R/         |       |       |       | A1 35D T/E ARC AMT BE/R/       |       |      |       | ISSUE SER D AMBAC BE/R/        |
|      |       | VARIABLE RATE                 |       |       |       | VARIABLE RATE                  |       |      |       | VARIABLE RATE                  |
|      |       | RATE 12.000% MATURES 06/01/34 |       |       |       | RATE 12.000% MATURES  06/01/36 |       |      |       | RATE 08.540% MATURES  01/01/37 |
|      |       |                          |       |       |       |                           |       |      |       |                           |
| 57563REZ8 |       | MASS EDL FING AUTH ED LN      |       | 594520KC 1 |       | MICHIGAN HGR ED STU-LOAN       |       | 594520KL1 |       | MICHIGAN HIGHER ED STUD        |
|      |       | RV SER A REV AMBAC /R/        |       |       |       | RFDG RV XVIIL AMT BER/R/       |       |      |       | LN AU RF AMT BE/R/             |
|      |       | VARIABLE RATE                 |       |       |       | VARIABLE RATE                  |       |      |       | VARIABLE RATE                  |
|      |       | RATE 10.028% MATURES 01/01/38 |       |       |       | RATE 08.540% MATURES  03/01/39 |       |      |       | RATE 06.878% MATURES  03/01/40 |
|      |       |                          |       |       |       |                           |       |      |       |                           |
| 594520KM9 |       | MICHIGAN HIGHER ED S/L        |       | 606072DF0  |       | MISSOURI HIGHER ED LN AU       |       | 644614HH5 |       | NEW HAMPSHIRE HLTH &  EDU  |
|      |       | AU RF XVII RV AMT B/E/R/      |       |       |       | S/L RV AMT B AMBAC BE/R/       |       |      |       | 35 DAY A-2 RV AMT B/E/R/       |
|      |       | VARIABLE RATE                 |       |       |       | VARIABLE RATE                  |       |      |       | VARIABLE RATE                  |
|      |       | RATE 08.540% MATURES 03/01/40 |       |       |       | RATE 10.203% MATURES  02/15/25 |       |      |       | RATE 12.000% MATURES  12/01/38 |
|      |       |                          |       |       |       |                           |       |      |       |                           |
| 709163CX5 |       | PA ST H/E ASST AGY REV        |       | 813659AM1  |       | HAWAII SECOND MKT SERV         |       | 917546ES8 |       | UTAH ST BRD OF REGT            |
|      |       | S/L ARCS P2 AMT B/E /R/       |       |       |       | T/E 35 DAY ARC AMT BE/R/       |       |      |       | SER G REV AMT B/E /R/          |
|      |       | VARIABLE RATE                 |       |       |       | VARIABLE RATE                  |       |      |       | VARIABLE RATE                  |
|      |       | RATE 14.000% MATURES 03/01/22 |       |       |       | RATE 06.615% MATURES  03/01/40 |       |      |       | RATE 08.540% MATURES 05/01/33  |
|      |       |                          |       |       |       |                           |       |      |       |                           |
| 917546FV0 |       | UTAH ST BRD OF REGT           |       | 917546FX6  |       | UTAH ST BRD OF REGT ARC        |       | 92428CDW1 |       | VERMONT ST STUD ASST CRP       |
|      |       | SER Y-1-C REV AMT B/E/R/      |       |       |       | CL V SER T REV AMT BE/R/       |       |      |       | SER 2000R REV AMBAC /R/        |
|      |       | VARIABLE RATE                 |       |       |       | VARIABLE RATE                  |       |      |       | VARIABLE RATE                  |
|      |       | RATE 13.738% MATURES 11/01/37 |       |       |       | RATE 13.738% MATURES  05/01/10 |       |      |       | RATE 13.300% MATURES  12/15/34 |

 
| ** ** | ** ** | **1C-ARSO** |
|------------|------------|-------------|

 

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| UBS | ** ** | **UBS Financial Services Inc.** |
|-----|------------|---------------------------------|

** **

Please complete and sign this form.

We must receive it by November 14, 2008.

 

**Acceptance of UBS's offer relating to auction rate securities**

 

By signing below and returning this form, I accept UBS’s offer of Rightsrelating to my Eligible ARS in the account listed below. I understand andacknowledge the following:

 

·        All Eligible ARS **must remain**in my UBS account listed below until Iexercise my Rights to sell my Eligible ARS to UBS or they are redeemed by the issuer or purchased orsold on my behalf by UBS;

·        I will instruct my UBS Financial Advisor or Branch Manager if and whenI want to exercise my Rights and sell my Eligible ARS to UBS during the periodof June 30, 2010, through July 2, 2012;

·        The acceptance of UBS’s offer constitutes consent (to the extentlegally required) for UBS, acting as principal, to purchase my Eligible ARS orto sell them on my behalf at any time in its sole discretion and without otherprior notice to me, from the date that I accept this offer through July 2,2012;

·        If UBS purchases, sells or otherwise disposes of my Eligible ARS, itwill deposit the par value in my account within one business day of settlementof the transaction;

·        I release UBS and its employees/agents from all claims except claimsfor consequential damages directly or indirectly relating to its marketing andsale of ARS and expressly agree that I will not seek any damages or costs(punitive damages, attorney fees, etc.) other than consequential damages. Ialso will not serve as a class representative or receive benefits under anyclass action settlement or investor fund;

·        If the account namedbelow is in the name of a corporation, partnership, trust or other entity, Irepresent and warrant that I have the power and authority to accept this offeron behalf of that entity.

 
| ** **        | ** ** | **Please complete and sign this form.**       |
|-------------------|------------|-----------------------------------------------|
| ** **        | ** ** | **We must receive  it by November 14, 2008.** |
| ** **        | ** ** | ** **                                    |   |
| ** **        | ** ** | **Mail**                                      | UBS Financial Services Inc. |
| CITI TRENDS, INC. |       |                                          | ATTN: ARS Group |
| 104 COLEMAN BLVD. |       |                                          | 1000  Harbor Boulevard |
| SAVANNAH GA 31408 |       |                                          | Weehawken, NJ 07086 |
|              |       |                                          |   |
| ** **        | ** ** | **Fax**                                       | +1-201-442-7766 |

 

Account Number: CP 73472

 
| Account owner signature    |   | /s/ Bruce D. Smith, CFO |   | Date   |   | 10/21/08 |
|----------------------------|--------|-------------------------|--------|--------|--------|----------|
|                       |   |                    |   |   |   |     |
| Additional party signature |   |                    |   | Date   |   |     |
|                       |   |                    |   |   |   |     |
| Daytime telephone number   |   | 912-443-2075            |   |   |   |     |

 

If you have questions, please contact your UBSFinancial Advisor or Branch Manager at +1-312-525-4500. Clients outside theU.S. may call +1-201-352-0105 collect.

 

**We kindly request that you do not include comments orquestions on this form as it could delay processing of your instructions.**

 

UBS AG has filed a registration statement (includinga prospectus) with the SEC for the offering to which this communicationrelates. Before you make an investment decision, you should read the prospectusin that registration statement and other documents that UBS has filed with theSEC for more complete information about UBS and this offering. You may getthese documents for free by visiting EDGAR on the SEC Web site at *www.sec.gov*or by calling UBS’s ARS Client Service Center at+1-800-253-1974.

 

UBS Financial Services Inc. serves as the clearingfirm for UBS International Inc. Accordingly, the information and termscontained in this letter and the accompanying materials are directed to clientsof both UBS Financial Services Inc and UBS International Inc.

 

©2008 UBS Financial Services Inc. All rights reserved.Member SIPC.

 

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