GOVERNING AGREEMENT AND COMPLETE RELEASES

Exhibit 10.1

GOVERNING AGREEMENT AND COMPLETE RELEASES

This is a Governing Agreement and Complete Releases (the “Governing Agreement”) by and between:

Koninklijke Philips Electronics N.V. (“Philips N.V.”), Philips Electronics North America Corporation (“PENAC”) and Philips Solid-State Lighting Solutions, Inc. (“PSSLS”; together with Philips N.V. and PENAC, “Philips”), on the one hand; and,

Lighting Science Group Corporation (“LSG”), LED Holdings, LLC (“LEH”) and LED Effects, Inc. (“LEI”; together with LSG and LEH, the “LED Group”);

and Pegasus Capital Advisors, L.P. (“Pegasus Capital”) and Pegasus Partners IV, L.P. (“Pegasus Partners”; together with Pegasus Capital, “Pegasus”), on the other.

WHEREAS:

A. PENAC and LEI entered into an Agreement for Use and Disclosure of Confidential Technical and/or Business Information, dated February 23, 2006 (the “2006 Confidentiality Agreement”);

B. PENAC and LEI entered into a Joint Development Agreement, dated as of March 14, 2006 (the “JDA”);

C. PENAC and LEI entered into a Common Interest Agreement, dated December 16, 2006 (the “Common Interest Agreement”);

D. PENAC and LEI entered into a Distributor Agreement, dated January 27, 2007 (the “Distributor Agreement”);

E. PENAC and LEI entered into a Value Added Reseller Agreement, dated February 2, 2007 (the “VAR Agreement”);

F. LEI, Philips N.V. and Pegasus Capital entered into a letter agreement, dated February 14, 2007 (the “LOI”);

G. Pegasus Capital and Philips N.V. entered into an agreement, dated March 15, 2007 (the “IP Due Diligence Confidentiality Agreement”);

H. Philips owns certain intellectual property and/or trade secrets related to LED lighting, including, but not limited to, U.S. Patent Numbers 6,788,011, 6,150,774, 6,806,659, 6,016,038, 7,221,104, 6,967,448 and 6,250,774 (collectively, “Philips IP”);

I. The LED Group owns certain intellectual property and/or trade secrets related to LED lighting (collectively, “LED Group IP”);

J. On February 19, 2008, Philips Solid-State Lighting Solutions, Inc. filed a Complaint against the LED Group in the U.S. District Court for the District of Massachusetts, captioned

Philips Solid-State Lighting Solutions, Inc., et al. v. Lighting Science Group Corp., et al. , No. 08-CV-10289-RWZ (the “First Massachusetts Action”);

K. On March 7, 2008, the LED Group filed a Complaint against Philips in the Superior Court of California, Sacramento County, captioned Lighting Science Group Corp., et al. v. Koninklijke Philips Electronics, N.V., et al. , No. 34-2008-5454 (the “California Action”);

L. On March 14, 2008, Pegasus Partners filed a Complaint against Philips in Texas District Court, County of Dallas, captioned Pegasus Partners IV, L.P . v. Koninklijke Philips Electronics N.V., et al. , No. 08-2848 (the “Texas Action”);

M. On April 11, 2008, Philips filed a Complaint against Pegasus in the Supreme Court of New York, County of New York, captioned Koninklijke Philips Electronics N.V., et al. v. Pegasus Capital Advisors, L.P., et al. , No. 601090/08 (the “New York Action”);

N. On September 24, 2008, LSG filed a Complaint against U.S. Philips Corporation in U.S. District Court for the Eastern District of California, captioned Lighting Science Group Corporation v. U.S. Philips Corporation , No. 08-2238-FCD (the “Second California Action”), which was dismissed on February 4, 2009;

O. On September 26, 2008, Philips filed a Complaint against the LED Group in the U.S. District Court for the District of Massachusetts, captioned Koninklijke Philips Electronics, N.V. v. Lighting Science Group Corp. , et al., No. 08-11650 (D. Mass.) (the “Second Massachusetts Action”);

P. On October 7, 2008, the court in the California Action entered a preliminary injunction against Philips (the “Preliminary Injunction”);

Q. On February 4, 2009, the Texas District Court dismissed the Texas Action as to PENAC and PSSLS on February 4, 2009 and on March 13, 2009, the action was non-suited against Philips N.V.;

R. LSG, PENAC, PSSLS, Philips N.V., Pegasus Capital and Pegasus Advisors entered into a Confidentiality Agreement, effective as of March 23, 2009 (the “2009 Confidentiality Agreement”), which has subsequently been amended (the “2009 Amended Confidentiality Agreement”); and,

S. Without addressing the merits of any party’s claims or defenses and without any admission of liability of any sort on the part of any party, Philips, LED Group and Pegasus (collectively, the “parties”) have decided to resolve and settle fully, finally and completely any and all claims or disputes relating to any matter or occurrence regarding any of the events preceding this Agreement, including disputes arising out of or related to the 2006 Confidentiality Agreement, the JDA, the Common Interest Agreement, the Distributor Agreement, the IP Due Diligence Confidentiality Agreement, the VAR Agreement, the LOI, Philips IP, LED Group IP, the First Massachusetts Action, the California Action, the Preliminary Injunction, the Texas Action, the New York Action, the Second California Action and the Second Massachusetts Action.

NOW, THEREFORE, in consideration of the foregoing, and the mutual promises and conditions contained herein, the parties agree as follows:

     1.  Effective Date . This Agreement shall be effective as of 27 August 2009 (the “Effective Date”).

     2.  Consideration .

     a. On the Effective Date, the parties shall deliver the following executed agreements (collectively, the “Related Agreements”):

          i. The Convertible Note, dated as of 27 August 2009 by and among Lighting Science Group Corporation and Koninklijke Philips Electronics N.V.

          ii. The Patent License Agreement, dated as of 27 August 2009 by and between Koninklijke Philips Electronics N.V. and Lighting Science Group Corporation;

          iii. The Commercial Framework Agreement, dated as of 27 August 2009 by and between Philips Lighting N.V. and Lighting Science Group Corporation.

     b. The execution and delivery of the Related Agreements identified in sub-section a above shall be deemed to be contemporaneous with the execution and delivery of this Governing Agreement.

     c. Although the Related Agreements are referenced in this Governing Agreement, their terms and provisions are not a part of this Governing Agreement and those terms and provisions have not been incorporated herein by reference.

     3.  Prior Agreements .

     a. IP Due Diligence Confidentiality Agreement. Notwithstanding anything in this Governing Agreement, the IP Due Diligence Confidentiality Agreement shall continue in full force and effect in accordance with its terms. To avoid any further assertion of breach or other claims, within ten (10) business days after the Effective Date, Pegasus and LSGC shall destroy or return to PENAC all tangible copies of the Confidential Information (as defined in the IP Due Diligence Confidentiality Agreement) provided and certify, in writing, (i) that all such Confidential Information has been destroyed or returned and, to the extent that such Confidential Information resides in readily accessible electronic form, that it has been deleted, or to the extent that such Confidential Information resides in backup electronic form, that it will be maintained as confidential in accordance with the terms of the IP Due Diligence Confidentiality Agreement, and (ii) that at the time the material was provided, a common interest existed, as specified in the IP Due Diligence Confidentiality Agreement. Notwithstanding the foregoing, LSGC’s and Pegasus’ outside counsel each may retain a copy of the Confidential Information subject to maintaining such copies as confidential in accordance with the terms of the IP Due Diligence Confidentiality Agreement.

     b. Common Interest Agreement . Notwithstanding anything in this Governing Agreement, the Common Interest Agreement shall continue in full force and effect in

accordance with its terms until 27 August 2011 and thereafter the materials disclosed pursuant to the Common Interest Agreement shall be considered non-confidential.

     c. The 2006 Confidentiality Agreement . Notwithstanding anything in this Governing Agreement, the 2006 Confidentiality Agreement shall continue in full force and effect in accordance with its terms.

     d. Other Agreements. The LOI, the Distributor Agreement, the VAR Agreement, and the JDA shall be considered terminated and/or expired according to their respective terms.

     4.  Releases .

     a. Effective on the Effective Date, Philips, on behalf of themselves, their present and former officers, directors, employees, parent and subsidiary entities, affiliates, and assigns (the “Philips Releasors”), do hereby forever release the LED Group, their present and former officers and directors, employees, agents, stockholders, affiliates, subsidiary or parent corporations, members, representatives, insurers, attorneys, advisors, successors, assigns, or anyone acting on their behalf (the “LED Group Releasees”), from any liability, whether known or unknown, suspected or unsuspected, concealed or hidden, accrued or unaccrued, from the beginning of time through the Effective Date, which against the LED Group Releasees (or any of them), the Philips Releasors (or any of them) ever had, or now have, including, but not limited to, claims in connection with, arising out of or in any way related to (i) the 2006 Confidentiality Agreement, the JDA, the Common Interest Agreement, the Distributor Agreement, the VAR Agreement, the IP Due Diligence Confidentiality Agreement, and the LOI; (ii) use of Philips IP; (iii) the allegations in the First Massachusetts Action, the California Action, the Second Massachusetts Action and the Second California Action; and (iv) the LED Group’s litigation conduct.

     b. Effective on the Effective Date, the Philips Releasors do hereby forever release Pegasus, their present and former officers and directors, employees, agents, stockholders, affiliates, subsidiary or parent corporations, members, representatives, insurers, attorneys, advisors, successors, assigns, or anyone acting on their behalf (the “Pegasus Releasees”), from any liability, whether known or unknown, suspected or unsuspected, concealed or hidden, accrued or unaccrued, from the beginning of time through the Effective Date, which against the Pegasus Releasees (or any of them), the Philips Releasors (or any of them) ever had, or now have, including, but not limited to, claims in connection with, arising out of or in any way related to (i) the LOI, the IP Due Diligence Confidentiality Agreement, and the Common Interest Agreement, (ii) the allegations in the Texas Action and the New York Action, and (iii) Pegasus’ litigation conduct.

     c. Effective