Swap Agreement



 Exhibit 10.3 
 

 
  

			
		  	BEAR STEARNS FINANCIAL PRODUCTS INC.
		  	383 MADISON AVENUE
		  	NEW YORK, NEW YORK 10179
		  	212-272-4009

  

			
	DATE:	  	May 11, 2006
		
	TO:	  	Wells Fargo Bank, N.A., not individually, but solely as Securities Administrator on behalf of SG Mortgage Securities Trust 2006-FRE1, Asset-Backed Certificates, Series
2006-FRE1
	ATTENTION:	  	Client Manager – SGMS 2006-FRE1
	TELEPHONE:	  	410-884-2000
	FACSIMILE:	  	410-715-2380
		
	FROM:	  	Derivatives Documentation
	TELEPHONE:	  	212-272-2711
	FACSIMILE:	  	212-272-9857
		
	SUBJECT:	  	Fixed Income Derivatives Confirmation and Agreement
		
	REFERENCE NUMBER:	  	FXNSC8210

 The purpose of this letter agreement (“Agreement”) is to confirm the terms and conditions of the current
Transaction entered into on the Trade Date specified below (the “Current Transaction”) between Bear Stearns Financial Products Inc. (“BSFP”) and Wells Fargo Bank, N.A., not individually, but solely as Securities Administrator and
Custodian on behalf of SG Mortgage Securities Trust 2006-FRE1, Asset-Backed Certificates, Series 2006-FRE1 (“Counterparty”) under the Pooling and Servicing Agreement, dated as of March 24, 2006, among Wells Fargo Bank, N.A., as Master
Servicer Securities Administrator and Custodian, SG Mortgage Securities, LLC, as Depositor and HSBC Bank USA, National Association, as Trustee (the “Pooling and Servicing Agreement”). This letter agreement constitutes the sole and complete
“Confirmation,” as referred to in the “ISDA Form Master Agreement” (as defined below), as well as a “Schedule” as referred to in the ISDA Form Master Agreement. 
 1. This Agreement is subject to the 2000 ISDA Definitions (the “Definitions”), as published by the International Swaps and Derivatives Association, Inc.
(“ISDA”). You and we have agreed to enter into this Agreement in lieu of negotiating a Schedule to the 1992 ISDA Master Agreement (Multicurrency—Cross Border) form (the “ISDA Form Master Agreement”) but, rather, an ISDA Form
Master Agreement shall be deemed to have been executed by you and us on the date we entered into the Transaction. In the event of any inconsistency between the provisions of this Agreement and the Definitions or the ISDA Form Master Agreement, this
Agreement shall prevail for purposes of the Transaction. Terms capitalized but not defined herein shall have the meanings attributed to them in the Pooling and Servicing Agreement. 







 Reference Number: FXNSC8210 
 Wells Fargo Bank, N.A., not individually, but solely as Securities Administrator on behalf of SG Mortgage Securities Trust 2006-FRE1, Asset-Backed Certificates, Series
2006-FRE1 
 May 11, 2006 
 Page 2 of 18 
 2. The terms of the particular Transaction to which this Confirmation relates are as follows: 
  

					
	Notional Amount:	  	With respect to any Calculation Period, the amount set forth for such period in Schedule I attached hereto.
		
	Trade Date:	  	May 11, 2006
		
	Effective Date:	  	May 11, 2006
		
	Termination Date:	  	May 25, 2011
		
	Fixed Amount:	  	
			
		  	Fixed Rate Payer:	  	Counterparty
			
		  	Fixed Rate Payer	  	
		  	Period End Dates:	  	The 25th calendar day of each month during the Term of
this Transaction, commencing June 25, 2006, and ending on the Termination Date, with No Adjustment.
			
		  	Fixed Rate Payer	  	
		  	Payment Dates:	  	Early Payment shall be applicable. The Fixed Rate Payer Payment Date shall be one Business Day prior to each Fixed Rate Payer Period End Date.
			
		  	Fixed Rate:	  	With respect to any Calculation Period, the rate set forth for such period in Schedule I attached hereto.
			
		  	Fixed Rate Day	  	
		  	Count Fraction:	  	30/360
		
	Floating Amounts:	  	
			
		  	Floating Rate Payer:	  	BSFP
			
		  	Floating Rate Payer	  	
		  	Period End Dates:	  	The 25th calendar day of each month during the Term of
this Transaction, commencing June 25, 2006, and ending on the Termination Date, subject to adjustment in accordance with the Business Day Convention.








 Reference Number: FXNSC8210 
 Wells Fargo Bank, N.A., not individually, but solely as Securities Administrator on behalf of SG Mortgage Securities Trust 2006-FRE1, Asset-Backed Certificates, Series 2006-FRE1 
 May 11, 2006 
 Page 3 of 18 
  

							
		  		  	Floating Rate Payer	  	
		  		  	Payment Dates:	  	Early Payment shall be applicable. The Floating Rate Payer Payment Date shall be one Business Day prior to each Floating Rate Payer Period End Date.
				
		  		  	Floating Rate for initial	  	
		  		  	Calculation Period:	  	5.10133%
				
		  		  	Floating Rate Option:	  	USD-LIBOR-BBA
				
		  		  	Designated Maturity:	  	One month
				
		  		  	Spread:	  	None
				
		  		  	Floating Rate Day	  	
		  		  	Count Fraction:	  	Actual/360
				
		  		  	Reset Dates:	  	The first day of each Calculation Period.
				
		  		  	Compounding:	  	Inapplicable
			
		  	Business Days:	  	New York and London
			
		  	Business Day Convention:	  	Modified Following
			
		  	Additional Amount:	  	In connection with entering into this Transaction USD 4,900,000 is payable by Counterparty to BSFP on May 11, 2006.
			
	3.	  	Additional Provisions:	  	Each party hereto is hereby advised and acknowledges that the other party has engaged in (or refrained from engaging in) substantial financial transactions and has taken (or refrained from
taking) other material actions in reliance upon the entry by the parties into the Transaction being entered into on the terms and conditions set forth herein and in the Confirmation relating to such Transaction, as applicable. This paragraph shall
be deemed repeated on the trade date of each Transaction.








 Reference Number: FXNSC8210 
 Wells Fargo Bank, N.A., not individually, but solely as Securities Administrator on behalf of SG Mortgage Securities Trust 2006-FRE1, Asset-Backed Certificates, Series
2006-FRE1 
 May 11, 2006 
 Page 4 of 18 
 4. Provisions Deemed Incorporated in a Schedule to the ISDA Form Master Agreement: 
  

	1)	The parties agree that subparagraph (ii) of Section 2(c) of the ISDA Form Master Agreement will apply to any Transaction. 

  

	2)	Termination Provisions. For purposes of the ISDA Form Master Agreement: 

  

	(a)	“Specified Entity” is not applicable to BSFP or Counterparty for any purpose. 

  

	(b)	“Breach of Agreement” provision of Section 5(a)(ii) will not apply to BSFP or Counterparty. 

  

	(c)	“Credit Support Default” provisions of Section 5(a)(iii) will not apply to Counterparty and will not apply to BSFP unless BSFP has obtained a guarantee pursuant to
paragraph 15 below. 

  

	(d)	“Misrepresentation” provisions of Section 5(a)(iv) will not apply to BSFP or Counterparty. 

 (e) “Specified Transaction” is not applicable to BSFP or Counterparty for any purpose, and, accordingly, Section 5(a)(v) shall not apply to BSFP or
Counterparty. 
 (f) The “Cross Default” provisions of Section 5(a)(vi) will not apply to BSFP or to Counterparty. 
 (g) The “Credit Event Upon Merger” provisions of Section 5(b)(iv) will not apply to BSFP or Counterparty. 
 (h) The “Bankruptcy” provision of Section 5(a)(vii)(2) will be inapplicable to Counterparty. 
 (i) The “Automatic Early Termination” provision of Section 6(a) will not apply to BSFP or to Counterparty. 
 (j) Payments on Early Termination. For the purpose of Section 6(e) of the ISDA Form Master Agreement: 
  

	 	(i)	Market Quotation will apply. 

  

	 	(ii)	The Second Method will apply. 

 (k) “Termination Currency” means
United States Dollars. 
 (l) The “Merger without Assumption” provision of Section 5(a)(viii) will not apply to Counterparty. 







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2006-FRE1 
 May 11, 2006 
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 (m) The “Tax Event Upon Merger” will apply to BSFP and not apply to Counterparty. 
 3) Tax Representations. 
 (a) Payer Representations. For the purpose of Section 3(e) of the ISDA Form Master Agreement, each of BSFP and the Counterparty will make the following representations: 
 It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make
any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of the ISDA Form Master Agreement) to be made by it to the other party under this Agreement. In making this
representation, it may rely on: 
 (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of this
Agreement; 
 (ii) the satisfaction of the agreement contained in Section 4(a)(iii) of the ISDA Form Master Agreement and the accuracy
and effectiveness of any document provided by the other party pursuant to Section 4(a)(iii) of the ISDA Form Master Agreement; and 
 (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement, provided that it shall not be a breach of this representation where reliance is placed on clause (ii) and the other party does
not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position. 
 (b) Payee
Representations. For the purpose of Section 3(f) of the ISDA Form Master Agreement, each of BSFP and the Counterparty make the following representations. 
 The following representation will apply to BSFP: 
 BSFP is a corporation organized under the laws of the
State of Delaware and its U.S. taxpayer identification number is 13-3866307. 
 The following representation will apply to the Counterparty:

 Counterparty represents that it is the Securities Administrator under the Pooling and Servicing Agreement. 







 Reference Number: FXNSC8210 
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2006-FRE1 
 May 11, 2006 
 Page 6 of 18 
 4) [Reserved] 
 5) Documents to be Delivered. For the purpose of Section 4(a): 
 (1) Tax forms, documents, or certificates to be
delivered are: 
  

					
	 Party required to deliver
 document
	  	 Form/Document/
 Certificate
	  	 Date by which to
 be delivered

	 BSFP and
 the Counterparty
	  	Any document required or reasonably requested to allow the other party to make payments under this Agreement without any deduction or withholding for or on the account of any Tax or with such
deduction or withholding at a reduced rate	  	Promptly after the earlier of (i) reasonable demand by either party or (ii) learning that such form or document is required

 (2) Other documents to be delivered are: 
  

							
	 Party required
 to
deliver
 document
	  	 Form/Document/
 Certificate
	  	 Date by which to
 be delivered
	  	Covered by Section 3(d)
Representation
				
	 BSFP and
 the Counterparty
	  	Any documents required by the receiving party to evidence the authority of the delivering party or its Credit Support Provider, if any, for it to execute and deliver this Agreement, any
Confirmation, and any Credit Support Documents to which it is a party, and to evidence the authority of the delivering party or its Credit Support Provider to perform its obligations under this Agreement, such Confirmation and/or Credit Support
Document, as the case may be	  	Upon the execution and
delivery of this Agreement
and such Confirmation	  	Yes








 Reference Number: FXNSC8210 
 Wells Fargo Bank, N.A., not individually, but solely as Securities Administrator on behalf of SG Mortgage Securities Trust 2006-FRE1, Asset-Backed Certificates, Series
2006-FRE1 
 May 11, 2006 
 Page 7 of 18 
  

							
	 Party required
 to
deliver
 document
	  	 Form/Document/
 Certificate
	  	 Date by which to
 be delivered
	  	Covered by Section 3(d)
Representation
				
	 BSFP and
 the Counterparty
	  	A certificate of an authorized officer of the party, as to the incumbency and authority of the respective officers of the party signing this Agreement, any relevant Credit Support Document, or
any Confirmation, as the case may be	  	Upon the execution and
delivery of this Agreement
and such Confirmation	  	Yes
				
	BSFP	  	 Legal opinion(s) with respect to such party and its Credit Support Provider, if any, for it reasonably satisfactory in form and substance to the
other party relating to the enforceability of the party's obligations under this Agreement.
	  	Upon the execution and
delivery of this Agreement
and any Confirmation	  	No
				
	Counterparty	  	An executed copy of the Pooling and Servicing Agreement.	  	Within 30 days after the
date of this Agreement.	  	No

 6) Miscellaneous. Miscellaneous 
  

	(a)	Address for Notices: For the purposes of Section 12(a) of the ISDA Form Master Agreement: 

 Address for notices or communications to BSFP: 
  

			
	Address:	  	383 Madison Avenue, New York, New York 10179
	Attention:	  	DPC Manager
	Facsimile:	  	(212) 272-5823








 Reference Number: FXNSC8210 
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2006-FRE1 
 May 11, 2006 
 Page 8 of 18 
 with a copy to: 
  

			
	Address:	  	One Metrotech Center North, Brooklyn, New York 11201
	Attention:	  	Derivative Operations - 7th Floor
	Facsimile:	  	(212) 272-1634

 (For all purposes) 
 Address for notices or communications to the Counterparty: 
  

			
	Address:	  	Wells Fargo Bank, N.A.
		  	9062 Old Annapolis Road
		  	Columbia, Maryland 21045
	Attention:	  	Client Manager –SGMS 2006-FRE1
	Facsimile:	  	410-715-2380
	Phone:	  	410-884-2000

 (For all purposes) 
 (b) Process Agent. For the purpose of Section 13(c): 
  

					
		 	BSFP appoints as its	  	
		 	Process Agent:	  	 Not Applicable

		
		 	The Counterparty appoints as its
		 	Process Agent:	  	 Not Applicable


 (c) Offices. The provisions of Section 10(a) will not apply to this Agreement; neither BSFP nor the
Counterparty have any Offices other than as set forth in the Notices Section and BSFP agrees that, for purposes of Section 6(b) of the ISDA Form Master Agreement, it shall not in future have any Office other than one in the United States.

 (d) Multibranch Party. For the purpose of Section 10(c) of the ISDA Form Master Agreement: 
 BSFP is not a Multibranch Party. 
 The
Counterparty is not a Multibranch Party. 
  

	(e)	Calculation Agent. The Calculation Agent is BSFP provider, however if an Event of Default has occurred and is continuing with respect to BSFP, then the Counterparty or a Reference
Market-maker designated by Counterparty shall be Calculation Agent. 

  

	(f)	Credit Support Document. 

 BSFP: Not applicable, unless
BSFP has obtained a guarantee pursuant to paragraph 15 below. 
 The Counterparty: Not Applicable 







 Reference Number: FXNSC8210 
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2006-FRE1 
 May 11, 2006 
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 (g) Credit Support Provider. 
  


			
	BSFP:	  	Not Applicable unless BSFP has obtained a guarantee pursuant to paragraph 15 below.
	
	The Counterparty: Not Applicable

 (h) Governing Law. The parties to this Agreement hereby agree that the law of the State of New York shall govern
their rights and duties in whole without regard to the conflict of law provisions thereof other than New York General Obligations Law Sections 5-1401 and 5-1402. 
 (i) Severability. If any term, provision, covenant, or condition of this Agreement, or the application thereof to any party or circumstance, shall be held to be invalid or unenforceable (in whole or in part) for any reason, the remaining
terms, provisions, covenants, and conditions hereof shall continue in full force and effect as if this Agreement had been executed with the invalid or unenforceable portion eliminated, so long as this Agreement as so modified continues to express,
without material change, the original intentions of the parties as to the subject matter of this Agreement and the deletion of such portion of this Agreement will not substantially impair the respective benefits or expectations of the parties.

 The parties shall endeavor to engage in good faith negotiations to replace any invalid or unenforceable term, provision, covenant or condition with a
valid or enforceable term, provision, covenant or condition, the economic effect of which comes as close as possible to that of the invalid or unenforceable term, provision, covenant or condition. 
 (j) Consent to Recording. Each party hereto consents to the monitoring or recording, at any time and from time to time, by the other party of any and all communications
between officers or employees of the parties, waives any further notice of such monitoring or recording, and agrees to notify its officers and employees of such monitoring or recording. 
 (k) Waiver of Jury Trial. Each party waives any right it may have to a trial by jury in respect of any Proceedings relating to this Agreement or any Credit Support Document. 
 (l) BSFP is a U.S. entity and no withholding tax is payable. In the event that BSFP is no longer a U.S. entity or its obligations or this Agreement is transferred to a
non-U.S. entity then the following provisions will apply and the Termination Events in Sections 5(b)(ii) and 5(b)(iii) will no longer be exercisable by BSFP: 







 Reference Number: FXNSC8210 
 Wells Fargo Bank, N.A., not individually, but solely as Securities Administrator on behalf of SG Mortgage Securities Trust 2006-FRE1, Asset-Backed Certificates, Series
2006-FRE1 
 May 11, 2006 
 Page 10 of 18 
 a) Section 2(d)(i)(4) of the ISDA Form Master Agreement is amended by (i) deleting
the words “However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for:”; and (ii) deleting subsections (A) and (B). 
 (b) Section 2(d)(ii) of the ISDA Form Master Agreement will not apply to Counterparty. 
 (c) Section 4(e) of the ISDA Form Master Agreement will not apply to the Counterparty. 
 (d) The definition of “Indemnifiable Tax” contained in Section 14 of the ISDA Form Master Agreement is deleted and is replaced with the
following: “‘Indemnifiable Tax’ means any and all withholding tax.” 
 7) “Affiliate”. Each of BSFP and Counterparty shall be
deemed to not have any Affiliates for purposes of this Agreement, including for purposes of Section 6(b)(ii). 
 8) Section 3 of the ISDA Form
Master Agreement is hereby amended by adding at the end thereof the following subsection (g): 
 “(g) Relationship Between
Parties. 
 Each party represents to the other party on each date when it enters into a Transaction that:— 
 (1) Nonreliance. It is not relying on any statement or representation of the other party regarding the Transaction (whether written or oral), other
than the representations expressly made in this Agreement or the Confirmation in respect of that Transaction. 
 (2) Evaluation and
Understanding. 
  

	 	(i)	BSFP is acting for its own account and Wells Fargo Bank, N.A., is acting as Securities Administrator on behalf of the Counterparty under the Pooling and Servicing Agreement, and not
for its own account. Each Party has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed
necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction; it being understood that information and explanations related to the terms and
conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction. It has not received from the other party any assurance or guarantee as to the expected results of this Transaction.









 Reference Number: FXNSC8210 
 Wells Fargo Bank, N.A., not individually, but solely as Securities Administrator on behalf of SG Mortgage Securities Trust 2006-FRE1, Asset-Backed Certificates, Series
2006-FRE1 
 May 11, 2006 
 Page 11 of 18 
  

	 	(ii)	It is capable of evaluating and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of this
Transaction. It is also capable of assuming, and assumes, the financial and other risks of this Transaction. 

  

	 	(iii)	The other party is not acting as an agent or fiduciary or an advisor for it in respect of this Transaction. 

 (3) Purpose. It is an “eligible swap participant” as such term is defined in Section 35.1(b)(2) of the regulations (17 C.F.R 35)
promulgated under, and an “eligible contract participant” as defined in Section 1(a)(12) of, the Commodity Exchange Act, as amended, and it is entering into the Transaction for the purposes of managing its borrowings or investments,
hedging its underlying assets or liabilities or in connection with a line of business.” 
 9) Pooling and Servicing Agreement. BSFP hereby agrees
that, notwithstanding any provision of this agreement to the contrary, Counterparty’s obligations to pay any amounts owing under this Agreement shall be subject to the Pooling and Servicing Agreement and BSFPS’s right to receive payment of
such amounts shall be subject to the Pooling and Servicing Agreement. 
 10) Securities Administrator Liability Limitations. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered by Wells Fargo Bank, N.A. (“Wells”), not individually or personally but solely as Securities Administrator on behalf of SG Mortgage Securities Trust,
Series 2006-FRE1, (b) each of the representations, undertakings and agreements herein made on the part of the Counterparty is made and intended not as a personal representation, undertaking or agreement of Wells but is made and intended for the
purpose of binding only the Counterparty, (c) nothing herein contained shall be construed as imposing any liability upon Wells, individually or personally, to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto; provided that nothing in this paragraph shall relieve Wells from performing its duties and obligations under the
Pooling and Servicing Agreement in accordance with the standard of care set forth therein, (d) under no circumstances shall Wells be personally liable for the payment of any indebtedness or expenses of the Counterparty or be liable for the
breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Counterparty under this Agreement or any other related documents, other than due to its gross negligence or willful misconduct in performing the
obligations of the Securities Administrator under the Pooling and Servicing Agreement, (e) any resignation or removal of Wells as Securities Administrator on behalf of SG Mortgage Securities Trust, Series 2006-FRE1 shall require the assignment
of this agreement to Wells's replacement, and (f) Wells has been directed, pursuant to the Pooling and Servicing Agreement, to enter into this Agreement and to perform its obligations hereunder. 
 11) Proceedings. BSFP shall not institute against or cause any other person to institute against, or join any other person in instituting against, SG Mortgage
Securities, LLC, or SG Mortgage 







 Reference Number: FXNSC8210 
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2006-FRE1 
 May 11, 2006 
 Page 12 of 18 
 Securities Trust 2006-FRE1, Asset-Backed Certificates, Series 2006-FRE1, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under any federal or state bankruptcy, dissolution or similar law, for a period of one year and one day (or, if longer, the applicable preference period) following indefeasible
payment in full of the SG Mortgage Securities Trust 2006-FRE1, Asset-Backed Certificates, Series 2006-FRE1. The provisions of this paragraph shall survive the termination of this Agreement. 
 12) Set-off. Notwithstanding any provision of this Agreement or any other existing or future agreement, each party irrevocably waives any and all rights it may
have to set off, net, recoup or otherwise withhold or suspend or condition payment or performance of any obligation between it and the other party hereunder against any obligation between it and the other party under any other agreements. The
provisions for Set-off set forth in Section 6(e) of the Agreement shall not apply for purposes of this Transaction. 
 13) Third party Beneficiary. Not Applicable. 
 14) Additional Termination Events. The following
Additional Termination Events will apply: 
 (i) If a Rating Agency Downgrade has occurred and BSFP has not complied with Section 15 below, then an
Additional Termination Event shall have occurred with respect to BSFP and BSFP shall be the sole Affected Party with respect to such an Additional Termination Event. 
 (ii) If the Trust is unable to pay its Class A Certificates or fails or admits in writing its inability to pay its Class A Certificates as they become due, then an Additional Termination Event shall have
occurred with respect to Counterparty and Counterparty shall be the sole Affected Party with respect to such Additional Termination Event. 
 (iii) If, at
any time, the Majority Class CE Certificateholder or the Master Servicer purchases the Mortgage Loans pursuant to Section 10.01 of the Pooling and Servicing Agreement, then an Additional Termination Event shall have occurred with respect to
Counterparty and Counterparty shall be the sole Affected Party with respect to such Additional Termination Event; provided, however, that notwithstanding the provisions of Section 6(b)(iv) of the ISDA Form Master Agreement, either BSFP or
Counterparty may designate an Early Termination Date (such date shall not be prior to the final Distribution Date under the Pooling and Servicing Agreement) in respect of this Additional Termination Event. 
 (iv) If, upon the occurrence of a Swap Disclosure Event (as defined in Section 15 below) BSFP has not, within ten (10) days after such Swap Disclosure Event
complied with any of the provisions set forth in Section 16 below, then an Additional Termination Event shall have occurred with respect to BSFP and BSFP shall be the sole Affected Party with respect to such Additional Termination Event.

 (v) Amendments to Pooling and Servicing Agreement. Without the prior written consent of BSFP, Counterparty shall not consent to any amendment or
supplemental agreement to the 







 Reference Number: FXNSC8210 
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 Page 13 of 18 
 Pooling and Servicing Agreement if such amendment or supplemental agreement could reasonably be expected to
have an adverse effect on the interests of BSFP, if such consent is required under the Pooling and Servicing Agreement. Counterparty will furnish to BSFP a copy of each proposed and each executed amendment or supplemental agreement and copies of any
related Rating Agency confirmation therewith, if any, if required pursuant to the Pooling and Servicing Agreement. The failure by Counterparty to comply with the above shall constitute an Additional Termination Event hereunder, upon which
Counterparty shall be the sole Affected Party and all Transactions hereunder shall be Affected Transactions. 
 15) Rating Agency Downgrade. In the
event that BSFP’s long-term unsecured and unsubordinated debt rating is reduced below “AA-” by S&P or its long-term unsecured and unsubordinated debt rating is withdrawn or reduced below “Aa3” by Moody's (and together
with S&P, the “Swap Rating Agencies”, and such rating thresholds, “Approved Rating Thresholds”), then within 30 days after such rating withdrawal or downgrade (unless, within 30 days after such withdrawal or downgrade, each
such Swap Rating Agency, as applicable, has reconfirmed the rating of the Certificates, which was in effect immediately prior to such withdrawal or downgrade), BSFP shall, at its own expense, subject to the Rating Agency Condition, either
(i) seek another entity to replace BSFP as party to this Agreement that meets or exceeds the Approved Rating Thresholds on terms substantially similar to this Agreement or (ii) obtain a guaranty of, or a contingent agreement of another
person with the Approved Rating Thresholds, to honor, BSFP’s obligations under this Agreement. BSFP’s failure to do any of the foregoing shall, at the Counterparty's option, constitute an Additional Termination Event with BSFP as the
Affected Party. In the event that BSFP's long-term unsecured and unsubordinated debt rating is withdrawn or reduced below “BBB-” by S&P, then within 10 Business Days after such rating withdrawal or downgrade, BSFP shall, subject to the
Rating Agency Condition and at its own expense, either (i) secure another entity to replace BSFP as party to this Agreement that meets or exceeds the Approved Rating Thresholds on terms substantially similar to this Agreement or
(ii) obtain a guaranty of, or a contingent agreement of another person with the Approved Rating Thresholds, to honor, BSFP’s obligations under this Agreement. For purposes of this provision, “Rating Agency Condition” means, with
respect to any particular proposed act or omission to act hereunder that the party acting or failing to act must consult with each of the Swap Rating Agencies then providing a rating of the Certificates and receive from each of the Swap Rating
Agencies a prior written confirmation that the proposed action or inaction would not cause a downgrade or withdrawal of the then-current rating of the Certificates. 
 16) Compliance with Regulation AB. 
 (i) BSFP agrees and acknowledges that SG Mortgage Securities, LLC,
(“SGMS”) and SG Mortgage Finance Corp. (“SGMFC”) are required under Regulation AB under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“Regulation
AB”), to disclose certain financial information regarding BSFP or its group of affiliated entities, if applicable, depending on the aggregate “significance percentage” of this 







 Reference Number: FXNSC8210 
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2006-FRE1 
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 Page 14 of 18 
 Agreement and any other derivative contracts between BSFP or its group of affiliated entities, if
applicable, and Counterparty, as calculated from time to time in accordance with Item 1115 of Regulation AB. 
 (ii) It shall be a swap disclosure event
(“Swap Disclosure Event”) if, on any Business Day after the date hereof, SGMS or SGMFC requests from BSFP the applicable financial information described in Item 1115 of Regulation AB (such request to be based on a reasonable
determination by SGMS, in good faith, that such information is required under Regulation AB) (the “Swap Financial Disclosure”). 
 (iii) Upon the
occurrence of a Swap Disclosure Event, BSFP, at its own expense, shall (a) provide to SGMS or SGMFC the Swap Financial Disclosure within (5) Business Days of such Swap Disclosure Event or (b) secure another entity to replace BSFP as
party to this Agreement on terms substantially similar to this Agreement and subject to prior notification to the Swap Rating Agencies, which entity meets or exceeds the Approved Rating Thresholds or which otherwise satisfies the Rating Agency
Condition and which entity is able to comply with the requirements of Item 1115 of Regulation AB (any such entity, a “Regulation AB approved entity) within (5) Business Days. If permitted by Regulation AB, any required Swap Financial
Disclosure may be provided by incorporation by reference from reports filed pursuant to the Exchange Act. 
 (iv) BSFP agrees that, in the event that BSFP
provides Swap Financial Disclosure to SGMS or SGMFC in accordance with clause (iii)(a) of paragraph 17 it will indemnify and hold harmless SGMS and SGMFC, their respective directors or officers and any person controlling SGMS or SGMFC, from and
against any and all losses, claims, damages and liabilities caused by any untrue statement or alleged untrue statement of a material fact contained in such Swap Financial Disclosure or caused by any omission or alleged omission to state in such Swap
Financial Disclosure a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 
 18) Transfer, Amendment and Assignment. No transfer, amendment, waiver, supplement, assignment or other modification of this Transaction shall be permitted by either party unless each of S&P and Moody's has
been provided notice of the same and each of S&P and Moody's confirms in writing (including by facsimile transmission) that it will not downgrade, qualify, withdraw or otherwise modify its then-current rating of the Certificates. 
 19) Non-Recourse. Notwithstanding any provision herein or in the ISDA Form Master Agreement to the contrary, the obligations of Counterparty hereunder are limited
recourse obligations of Counterparty, payable solely from the Swap Account and the proceeds thereof, in accordance with the terms of the Pooling and Servicing Agreement. In the event that the Swap Account and proceeds thereof should be insufficient
to satisfy all claims outstanding and following the realization of the Swap Account and the proceeds thereof, any claims against or obligations of Counterparty under the ISDA Form Master Agreement or any other confirmation thereunder still








 Reference Number: FXNSC8210 
 Wells Fargo Bank, N.A., not individually, but solely as Securities Administrator on behalf of SG Mortgage Securities Trust 2006-FRE1, Asset-Backed Certificates, Series
2006-FRE1 
 May 11, 2006 
 Page 15 of 18 
 outstanding shall be extinguished and thereafter not revive. The Securities Administrator shall not have
liability for any failure or delay in making a payment hereunder to BSFP due to any failure or delay in receiving amounts in the Swap Account from the Trust created pursuant to the Pooling and Servicing Agreement. The provisions of this paragraph
shall survive the termination of the Agreement. 
 NEITHER THE BEAR STEARNS COMPANIES INC. NOR ANY SUBSIDIARY OR AFFILIATE OF THE BEAR
STEARNS COMPANIES INC. OTHER THAN BSFP IS AN OBLIGOR OR A CREDIT SUPPORT PROVIDER ON THIS AGREEMENT. 
  

					
	5.	  	Account Details and	  	
		  	Settlement Information:	  	Payments to BSFP:
		  		  	Citibank, N.A., New York
		  		  	ABA Number: 021-0000-89, for the account of
		  		  	Bear, Stearns Securities Corp.
		  		  	Account Number: 0925-3186, for further credit to
		  		  	Bear Stearns Financial Products Inc.
		  		  	Sub-account Number: 102-04654-1-3
		  		  	Attention: Derivatives Department
			
		  		  	Payments to Counterparty:
		  		  	Wells Fargo Bank, N.A.
		  		  	San Francisco, California
		  		  	ABA#: 121-000-248
		  		  	Account#: 3970771416
		  		  	Account Name: SAS Clearing
		  		  	FFC: 50910902

 This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. 
 Counterparty hereby agrees to check this Confirmation and to confirm that the foregoing correctly
sets forth the terms of the Transaction by signing in the space provided below and returning to BSFP a facsimile of the fully-executed Confirmation to 212-272-9857. For inquiries regarding U.S. Transactions, please contact Susan Donlon
by telephone at 212-272-2364. For all other inquiries please contact Derivatives Documentation by telephone at 353-1-402-6233. Originals will be provided for your execution upon your request. 







 Reference Number: FXNSC8210 
 Wells Fargo Bank, N.A., not individually, but solely as Securities Administrator on behalf of SG Mortgage Securities Trust 2006-FRE1, Asset-Backed Certificates, Series
2006-FRE1 
 May 11, 2006 
 Page 16 of 18 
 We are very pleased to have executed this Transaction with you and we look forward to completing other
transactions with you in the near future. 
 Very truly yours, 
 BEAR STEARNS FINANCIAL PRODUCTS INC. 
  

			
	 By:
	 	 /s/ Annie Manevitz
  

	 Name:
	 	 Annie Manevitz

	 Title:
	 	 Authorized Signatory


 Counterparty, acting through its duly authorized signatory, hereby agrees to, accepts and confirms the terms of
the foregoing as of the Trade Date. 
 WELLS FARGO BANK, N.A., NOT INDIVIDUALLY, BUT SOLELY AS SECURITIES ADMINISTRATOR ON BEHALF OF SG MORTGAGE
SECURITIES TRUST 2006-FRE1, ASSET-BACKED CERTIFICATES, SERIES 2006-FRE1 
  

			
	By:	 	 /s/ Peter A. Gobell
  

	Name:	 	Peter A. Gobell
	Title:	 	Vice President

 am 







 Reference Number: FXNSC8210 
 Wells Fargo Bank, N.A., not individually, but solely as Securities Administrator on behalf of SG Mortgage Securities Trust 2006-FRE1, Asset-Backed Certificates, Series
2006-FRE1 
 May 11, 2006 
 Page 17 of 18 
 SCHEDULE I 
 (For the purposes of (i) determining Floating Amounts, all such dates subject to adjustment in accordance with the Business Day Convention and (ii) determining Fixed Amounts, all such
dates subject to No Adjustment) 
  

								
	 From and including
	  	To but excluding	  	Notional Amount	  	Fixed Rate	 
	 	  	 	  	(USD)	  	 	 
	 Effective Date
	  	25-Jun-06	  	933,154,000.00	  	4.8094	%
	 25-Jun-06
	  	25-Jul-06	  	929,952,158.00	  	5.1000	%
	 25-Jul-06
	  	25-Aug-06	  	915,141,365.00	  	5.1000	%
	 25-Aug-06
	  	25-Sep-06	  	898,808,766.00	  	5.1000	%
	 25-Sep-06
	  	25-Oct-06	  	880,593,282.00	  	5.1000	%
	 25-Oct-06
	  	25-Nov-06	  	860,322,676.00	  	5.1000	%
	 25-Nov-06
	  	25-Dec-06	  	837,660,299.00	  	5.1000	%
	 25-Dec-06
	  	25-Jan-07	  	811,926,584.00	  	5.1000	%
	 25-Jan-07
	  	25-Feb-07	  	785,184,492.00	  	5.1000	%
	 25-Feb-07
	  	25-Mar-07	  	758,505,383.00	  	5.1000	%
	 25-Mar-07
	  	25-Apr-07	  	732,290,830.00	  	5.1000	%
	 25-Apr-07
	  	25-May-07	  	706,584,865.00	  	5.1000	%
	 25-May-07
	  	25-Jun-07	  	681,943,750.00	  	5.1000	%
	 25-Jun-07
	  	25-Jul-07	  	657,628,145.00	  	5.1000	%
	 25-Jul-07
	  	25-Aug-07	  	632,013,972.00	  	5.1000	%
	 25-Aug-07
	  	25-Sep-07	  	601,671,875.00	  	5.1000	%
	 25-Sep-07
	  	25-Oct-07	  	565,504,002.00	  	5.1000	%
	 25-Oct-07
	  	25-Nov-07	  	531,575,633.00	  	5.1000	%
	 25-Nov-07
	  	25-Dec-07	  	499,739,087.00	  	5.1000	%
	 25-Dec-07
	  	25-Jan-08	  	469,841,241.00	  	5.1000	%
	 25-Jan-08
	  	25-Feb-08	  	441,737,544.00	  	5.1000	%
	 25-Feb-08
	  	25-Mar-08	  	415,290,754.00	  	5.1000	%
	 25-Mar-08
	  	25-Apr-08	  	390,466,503.00	  	5.1000	%
	 25-Apr-08
	  	25-May-08	  	367,162,672.00	  	5.1000	%
	 25-May-08
	  	25-Jun-08	  	207,169,725.00	  	5.1000	%
	 25-Jun-08
	  	25-Jul-08	  	194,789,429.00	  	5.1000	%
	 25-Jul-08
	  	25-Aug-08	  	184,734,507.00	  	5.1000	%
	 25-Aug-08
	  	25-Sep-08	  	177,950,810.00	  	5.1000	%
	 25-Sep-08
	  	25-Oct-08	  	171,414,975.00	  	5.1000	%








 Reference Number: FXNSC8210 
 Wells Fargo Bank, N.A., not individually, but solely as Securities Administrator on behalf of SG Mortgage Securities Trust 2006-FRE1, Asset-Backed Certificates, Series
2006-FRE1 
 May 11, 2006 
 Page 18 of 18 
  

								
	 25-Oct-08
	  	25-Nov-08	  	165,117,509.00	  	5.1000	%
	 25-Nov-08
	  	25-Dec-08	  	159,049,306.00	  	5.1000	%
	 25-Dec-08
	  	25-Jan-09	  	153,201,636.00	  	5.1000	%
	 25-Jan-09
	  	25-Feb-09	  	147,566,253.00	  	5.1000	%
	 25-Feb-09
	  	25-Mar-09	  	142,135,363.00	  	5.1000	%
	 25-Mar-09
	  	25-Apr-09	  	136,900,812.00	  	5.1000	%
	 25-Apr-09
	  	25-May-09	  	131,855,491.00	  	5.1000	%
	 25-May-09
	  	25-Jun-09	  	127,024,884.00	  	5.1000	%
	 25-Jun-09
	  	25-Jul-09	  	126,057,866.00	  	5.1000	%
	 25-Jul-09
	  	25-Aug-09	  	121,737,200.00	  	5.1000	%
	 25-Aug-09
	  	25-Sep-09	  	117,472,469.00	  	5.1000	%
	 25-Sep-09
	  	25-Oct-09	  	113,348,999.00	  	5.1000	%
	 25-Oct-09
	  	25-Nov-09	  	109,367,239.00	  	5.1000	%
	 25-Nov-09
	  	25-Dec-09	  	105,522,303.00	  	5.1000	%
	 25-Dec-09
	  	25-Jan-10	  	101,809,474.00	  	5.1000	%
	 25-Jan-10
	  	25-Feb-10	  	98,224,199.00	  	5.1000	%
	 25-Feb-10
	  	25-Mar-10	  	94,762,081.00	  	5.1000	%
	 25-Mar-10
	  	25-Apr-10	  	91,418,876.00	  	5.1000	%
	 25-Apr-10
	  	25-May-10	  	88,190,486.00	  	5.1000	%
	 25-May-10
	  	25-Jun-10	  	85,072,954.00	  	5.1000	%
	 25-Jun-10
	  	25-Jul-10	  	82,062,463.00	  	5.1000	%
	 25-Jul-10
	  	25-Aug-10	  	79,155,324.00	  	5.1000	%
	 25-Aug-10
	  	25-Sep-10	  	76,347,978.00	  	5.1000	%
	 25-Sep-10
	  	25-Oct-10	  	73,636,988.00	  	5.1000	%
	 25-Oct-10
	  	25-Nov-10	  	71,019,036.00	  	5.1000	%
	 25-Nov-10
	  	25-Dec-10	  	68,490,919.00	  	5.1000	%
	 25-Dec-10
	  	25-Jan-11	  	66,049,545.00	  	5.1000	%
	 25-Jan-11
	  	25-Feb-11	  	63,691,815.00	  	5.1000	%
	 25-Feb-11
	  	25-Mar-11	  	61,406,934.00	  	5.1000	%
	 25-Mar-11
	  	25-Apr-11	  	59,200,649.00	  	5.1000	%
	 25-Apr-11
	  	Termination Date	  	57,070,250.00	  	5.1000	%