Exhibit 5

July 24, 2016

Members of the Board of Directors of Skullcandy, Inc.

c/o Peter J. Solomon Company

1345 Avenue of the Americas, 31^st Floor

New York, NY 10105

Dear Members of the Board:

Mill Road Capital Management LLC and its affiliated funds (“Mill Road”) are pleased to present this proposal (the “Proposal”) to acquire Skullcandy, Inc. (the “Company”). We specifically highlight to the Board that our proposal is superior to the Existing Merger Agreement on two critical dimensions. Our price is superior by 30 cents per share (over 5 percent) and our termination fee is lower by approximately $400,000 (over 6 percent). The terms of our Proposal are as follows:

• Price and Form of Consideration. Mill Road proposes to acquire 100% of the fully diluted stock of the Company for cash consideration of $6.05 per share, payable at closing.

• Transaction Structure. Mill Road anticipates the transaction will be structured as a tender offer followed promptly by a merger effected pursuant to Section 251(h) of the Delaware General Corporation Law, identical to the current structure agreed to by the Company pursuant to its existing June 23, 2016 Agreement and Plan of Merger with Incipio, LLC and Powder Merger Sub, Inc. (the “Existing Merger Agreement”).

• Financing. Mill Road will provide all of the equity capital necessary for the Proposal; please see the form Equity Commitment Letter and form Sponsor Guarantee, attached as Exhibit A and Exhibit B, respectively, to this Proposal. In addition, Mill Road has obtained a Debt Commitment Letter from Cerberus Business Finance, LLC and PNC Bank, National Association, which is attached as Exhibit C to this Proposal.

• Approvals. The Investment Committee of Mill Road, consisting of the senior investment professionals of the firm, has approved the Proposal. Mill Road does not require any further partnership approvals to move forward. Because Mill Road does not own interests in any businesses that compete with the Company, we anticipate that any required regulatory approvals, such as Hart-Scott-Rodino approval, would not materially impact the timing or certainty of the transaction.

• Diligence. Mill Road and its advisors have been granted access to the Company’s data room, have completed applicable diligence of the Company and do not require any additional diligence.

382 Greenwich Avenue, Suite One • Greenwich, CT 06830 • (203) 987-3500

• Merger Agreement. Mill Road is prepared to sign a definitive merger agreement including terms and conditions substantially identical to the Existing Merger Agreement. Please see Mill Road’s proposed form of merger agreement attached as Exhibit D to this Proposal. As seen in Exhibit D, Mill Road proposes only four substantive changes to the Existing Merger Agreement: (i) a higher purchase price per share; (ii) a lower termination fee; (iii) that the Company will take appropriate action to render the Company’s Rights Agreement inapplicable to Mill Road’s tender offer and the subsequent merger; and (iv) replacement of the Existing Merger Agreement’s “go shop” provisions with “no solicitation” provisions (as the Company has now had an opportunity to “shop” for a higher offer), while maintaining a “fiduciary out” for the benefit of the Company’s board. Mill Road would be pleased to make our counsel available to speak with the Company’s counsel if it would be helpful to discuss the terms of Mill Road’s proposed merger agreement. Contact information is found at the end of this letter.

• Timing. Mill Road is prepared to move expeditiously to execute a definitive acquisition agreement.

• Contact. Please contact Thomas Lynch to answer any questions with regards to this letter. Contact information is found at the end of this letter.

• Legal Disclaimer. This letter is not intended to create and shall not create legally binding obligations to enter into an acquisition agreement or any other documentation contemplated by this letter or consummate any proposed transaction and creates no rights in favor of the Company with respect to the proposed transaction. A binding commitment with respect to the proposed transaction will result only from execution of a definitive acquisition agreement.

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Mill Road looks forward to discussing this Proposal at your earliest convenience.

Sincerely, Mill Road Capital Management LLC
By:	/s/ Thomas Lynch
	Thomas Lynch
	Senior Managing Director and Management Committee Director

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Contact Information

Mill Road Capital Management LLC

Thomas Lynch

382 Greenwich Avenue, Suite One

Greenwich, CT 06830

Telephone: (203) 987-3501

Email: tlynch@millroadcapital.com

Foley Hoag LLP

Peter Rosenblum

Seaport West

155 Seaport Boulevard

Boston, MA 02210

Telephone: (617) 832-1151

Email: pmr@foleyhoag.com

Joseph Basile

Seaport West

155 Seaport Boulevard

Boston, MA 02210

Telephone: (617) 832-1101

Email: jbasile@foleyhoag.com

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