Reindeer Toy Company(an NC company) needed to expand their business with a distribution facility in Georgia.The three officers decided to begin the expansion by obtaining a $200,000 loan from Coastal Bank and leasing a warehouse. Coastal Bank did not want to lend that much money to a toy company and required some sort of promise that the loan would be repaid.Therefore, Rudolph Reindeer signed a separate (collateral) agreement with Coastal Bank stating that ifReindeer Toy Companydid not repay the loan on time, the bank could take legal action to obtain the money from Rudolph Reindeer's personal assets.Rudolph Reindeer's agreement with Coastal IfReindeer Toy Companyfails to pay (defaults) on the bank loan, then Coastal Bank can:

File suit againstReindeer Toy Companyand then, if the bank doesn't win that lawsuit, file a lawsuit against Rudolph Reindeer to recover the loan money from his personal accounts

Force Reindeer Toy Company into bankruptcy

Immediately demand payment from Rudolph Reindeer since he is a surety (co-signer)

Force Rudolph Reindeer into bankruptcy