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                                                                    EXHIBIT 10.3
                                                                  EXECUTION COPY



                                   GUARANTY
                         dated as of November 16, 2000

                                    made by

                                 PALM, INC.,
                                 as Guarantor


                                  in favor of

                      SOCIETE GENERALE, NEW YORK BRANCH,
        as Administrative Agent for the ratable benefit of the Lenders
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                                   GUARANTY

          THIS GUARANTY (this "Guaranty"), dated as of November 16, 2000, is
                               --------
   made by PALM, INC., a Delaware corporation (the "Guarantor"), in favor of
                                                    ---------
   SOCIETE GENERALE, NEW YORK BRANCH as administrative agent for the ratable
   benefit of the Lenders (the "Administrative Agent") (with its successors and
                                --------------------
   assigns, the "Beneficiary").
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                             W I T N E S S E T H:

          WHEREAS, pursuant to the Participation Agreement, dated as the date
hereof (together with all amendments, supplements, amendments and restatements
and other modifications, if any, from time to time thereafter made thereto, the
"Participation Agreement"), among the Lessee, the Guarantor, the Construction
 -----------------------
Agent, the Lessor, the Administrative Agent and the Lenders, the Lenders have
agreed, subject to the terms thereof, to make Loans available to the Lessor from
time to time during the Commitment Period, and the Lessor has agreed, subject to
the terms thereof, to make Advances to the Lessee from time to time during the
Commitment Period;

          WHEREAS, as a condition precedent to the Lender making Loans under the
Loan Agreements and the other relevant Operative Documents, the Guarantor is
required to execute and deliver this Guaranty in favor of the Beneficiary;

          WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty;

          WHEREAS, it is in the best interest of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial benefits from the
transactions contemplated by the Participation Agreement and the other Operative
Documents; and

          WHEREAS, the Guarantor desires to execute this Guaranty.

          NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Lenders to enter into
the Participation Agreement and each of the other Operative Documents to which
they are a party, the Guarantor agrees, for the benefit of the Beneficiary, as
follows:

                                   ARTICLE I

                                  DEFINITIONS

          SECTION 1.1. Definitions. Capitalized terms used but not otherwise
                       -----------
defined in this Guaranty have the respective meanings specified in Appendix A to
the Participation Agreement; and the rules of interpretation set forth therein
shall apply to this Guaranty.
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                                  ARTICLE II

                              GUARANTY PROVISIONS

          SECTION 2.1. Guaranty. (a) Subject to the provisions of Section
                       --------                                   -------
2.1(b), the Guarantor, as primary obligor and not as surety, hereby absolutely,
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unconditionally and irrevocably guarantees to the Beneficiary the prompt and
complete payment and performance by the Lessor when due (whether at the stated
maturity, by acceleration or otherwise) of the unpaid principal of and interest
on the Notes and all other obligations and liabilities of the Lessor to the
Beneficiary (including interest accruing at the then applicable rate provided in
the Loan Agreements after the maturity of the Loans and interest accruing at the
then applicable rate provided in the Loan Agreements after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to the Lessor, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter incurred, which may arise under, out of, or in connection with, the
Loan Agreements, the Notes, the other Operative Documents or any other document
made, delivered or given in connection therewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including all reasonable fees and disbursements of
counsel to the Beneficiary that are required to be paid by the Lessor pursuant
to the terms of the Loan Agreements or any other Operative Document)
(collectively, the "Guaranteed Obligations").
                    ----------------------

          (b) Notwithstanding anything herein to the contrary, unless and until
a Lease Event of Default or a Lease Default has occurred and is continuing as of
the Expiration Date, the Guarantor shall have no liability with respect to the
Guaranteed Obligations.

          (c) The Guarantor agrees to pay any and all expenses (including all
reasonable fees and disbursements of counsel) which may be paid or incurred by
the Beneficiary in enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the Guaranteed Obligations
and/or enforcing any rights with respect to, or collecting against, the
Guarantor under this Guaranty. This Guaranty shall remain in full force and
effect until the Guaranteed Obligations and all amounts owing hereunder are paid
in full and the Loan Commitments are terminated, notwithstanding that from time
to time prior thereto the Lessor may be free from any Guaranteed Obligations.

          (d) No payment or payments made by the Lessor, the Guarantor or any
other Person or received or collected by the Beneficiary from the Lessor, the
Guarantor or any other Person by virtue of any action or proceeding or any set-
off or appropriation or application at any time or from time to time in
reduction of or in payment of the Guaranteed Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the Guarantor
hereunder which shall, notwithstanding any such payment or payments remain
liable for the Guaranteed Obligations until the Guaranteed Obligations and all
amounts owing hereunder are paid in full and the Loan Commitments are
terminated.
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          (e) The Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Beneficiary on account of its liability
hereunder, it will notify the Beneficiary in writing that such payment is made
under this Guaranty for such purpose.

          SECTION 2.2. Right of Set-off. In addition to any rights now or
                       ----------------
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
an Event of Default, the Beneficiary is hereby authorized at any time or from
time to time, without presentment, demand, protest or other notice of any kind
to the Lessor, the Guarantor or to any other Person, any such notice being
hereby expressly waived, to set-off and to appropriate and apply any and all
deposits (general or special) and any other Indebtedness at any time held or
owing by the Beneficiary (including, without limitation, by branches and
agencies of the Beneficiary wherever located) to or for the credit or the
account of the Guarantor against and on account of the obligations and
liabilities of the Guarantor hereunder or under any of the other Operative
Documents, and all other claims of any nature or description arising out of or
connected with this Guaranty or any other Operative Documents, irrespective of
whether the Beneficiary shall have made any demand hereunder and although said
obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.

          SECTION 2.3. No Subrogation. Notwithstanding any payment or payments
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made by the Guarantor hereunder or any set-off or application of funds of the
Guarantor by the Beneficiary, the Guarantor shall not be entitled to exercise or
enforce any subrogation rights of the Beneficiary against the Lessor or any
other Person or any collateral security or guaranty or right of offset held by
the Beneficiary for the payment of the Guaranteed Obligations, nor shall the
Guarantor seek or be entitled to seek any contribution or reimbursement from the
Lessor or any other Person in respect of payments made by the Guarantor
hereunder, until all amounts owing to the Beneficiary by the Lessor on account
of the Guaranteed Obligations and all amounts owing hereunder are paid in full
and the Loan Commitments are terminated. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any time when all of the
Guaranteed Obligations and all amounts owing hereunder shall not have been paid
in full or the Loan Commitments shall not have been terminated, such amount
shall be held by the Guarantor in trust for the Beneficiary, segregated from
other funds of the Guarantor, and shall, forthwith upon receipt by the
Guarantor, be turned over to the Beneficiary in the exact form received by the
Guarantor (duly indorsed by the Guarantor to the Beneficiary, if required), to
be applied against the Guaranteed Obligations, whether matured or unmatured, in
such order as the Beneficiary may determine.

          SECTION 2.4. Amendments, etc. with respect to the Guaranteed
                       -----------------------------------------------
Obligations; Waiver of Rights. The Guarantor shall remain obligated hereunder
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notwithstanding that, without any reservation of rights against the Guarantor
and without notice to or further assent by the Guarantor, any demand for payment
of any of the Guaranteed Obligations made by the Beneficiary may be rescinded by
such party and any of the Guaranteed Obligations continued, and the Guaranteed
Obligations, or the liability of any other party upon or for any part thereof,
or any collateral security or guaranty therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended,
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modified, accelerated, compromised, waived, surrendered or released by the
Beneficiary, and the Loan Agreements, the Participation Agreement and the other
Operative Documents may be amended, modified, supplemented or terminated, in
whole or in part, as the Beneficiary may deem advisable from time to time, and
any collateral security, guaranty or right of offset at any time held by the
Beneficiary for the payment of the Guaranteed Obligations may be sold,
exchanged, waived, surrendered or released. The Beneficiary shall not have any
obligation to protect, secure, perfect or insure any Lien at any time held by it
as security for the Guaranteed Obligations or for this Guaranty or any property
subject thereto. When making any demand hereunder against the Guarantor, the
Beneficiary may, but shall be under no obligation to, make a similar demand on
the Lessor or any other guarantor, and any failure by the Beneficiary to make
any such demand or to collect any payments from the Lessor or any other
guarantor or any release of the Lessor or such other guarantor shall not relieve
the Guarantor, and shall not impair or affect the rights and remedies, express
or implied, or as a matter of law, of the Beneficiary against the Guarantor. For
the purposes hereof "demand" shall include the commencement and continuance of
any legal proceedings.

          SECTION 2.5. Guaranty Absolute and Unconditional. The Guarantor waives
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any and all notice of the creation, renewal, extension or accrual of any of the
Guaranteed Obligations and notice of or proof of reliance by the Beneficiary
upon this Guaranty or acceptance of this Guaranty; the Guaranteed Obligations,
and any of them, shall conclusively be deemed to have been created, contracted
or incurred, or renewed, extended, amended or waived, in reliance upon this
Guaranty; and all dealings between the Lessor and the Guarantor, on the one
hand, and the Beneficiary, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon this Guaranty. The
Guarantor waives diligence, presentment, protest, demand for payment and notice
of default or nonpayment to or upon the Lessor or the Guarantor with respect to
the Guaranteed Obligations. The Guarantor understands and agrees that this
Guaranty shall be construed as a continuing, absolute and unconditional guaranty
and surety of payment without regard to (a) the validity, regularity or
enforceability of the Loan Agreements or any other Operative Document, any of
the Guaranteed Obligations or any other collateral security therefor or guaranty
or right of offset with respect thereto at any time or from time to time held by
the Beneficiary (b) any defense, set-off or counterclaim (other than a defense
of payment or performance) which may at any time be available to or be asserted
by the Lessor or the Guarantor against the Beneficiary, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the Lessor or
the Guarantor) which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Lessor for the Guaranteed Obligations, or of
the Guarantor under this Guaranty, in bankruptcy or in any other instance. When
pursuing its rights and remedies hereunder against the Guarantor, the
Beneficiary may, but shall be under no obligation to, pursue such rights and
remedies as it may have against the Lessor or any other Person or against any
collateral security or guaranty for the Guaranteed Obligations or any right of
offset with respect thereto, and any failure by the Beneficiary to pursue such
other rights or remedies or to collect any payments from the Lessor or any such
other Person or to realize upon any such collateral security or guaranty or to
exercise any such right of offset, or any release of the Lessor or any such
other Person or any such collateral security, guaranty or right of offset, shall
not relieve the Guarantor of any liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied
<PAGE>

or available as a matter of law, of the Beneficiary against the Guarantor. This
Guaranty shall remain in full force and effect and be binding in accordance with
and to the extent of its terms upon the Guarantor and the successors and assigns
thereof, and shall inure to the benefit of the Beneficiary, and its successor,
indorsee, transferee and assign, until all the Guaranteed Obligations and the
obligations of the Guarantor under this Guaranty shall have been satisfied by
payment in full and the Loan Commitments shall be terminated, notwithstanding
that from time to time during the term of the Loan Agreements the Lessor may be
free from any Guaranteed Obligations.

          SECTION 2.6. Reinstatement. This Guaranty shall continue to be
                       -------------
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Guaranteed Obligations is rescinded or must
otherwise be restored or returned by the Beneficiary upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Lessor or the
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Lessor or the
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.

                                  ARTICLE III

                           MISCELLANEOUS PROVISIONS

          SECTION 3.1. Operative Document. This Guaranty is an Operative
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Document executed pursuant to the Participation Agreement and shall (unless
expressly indicated herein) be construed, administered and applied in accordance
with the terms and provisions of the Participation Agreement, including, without
limitation, Article XV thereof.

          SECTION 3.2. Binding on Successors, Transferees and Assigns;
                       ----------------------------------------------
Assignment of Guaranty. This Guaranty shall be binding upon the Guarantor and
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its successors, transferees and assigns and shall inure to the benefit of and be
enforceable by the Beneficiary and its permitted successor and assign; provided,
however, that the Guarantor may not assign any of its obligations hereunder
without the prior written consent of each Participant.

          SECTION 3.3. Amendments, etc. No amendment to or waiver of any
                       ---------------
provision of this Guaranty, nor consent to any departure by the Guarantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Beneficiary, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

          SECTION 3.4. Addresses for Notices to the Guarantor. All notices,
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demands, requests, consents, approvals and other communications hereunder shall
be in writing and directed to the address described in, and deemed received in
accordance with the provisions of, Section 15.3 of the Participation Agreement.
<PAGE>

          SECTION 3.5.  No Waiver; Remedies. In addition to, and not in
                        -------------------
limitation of, the other provisions of this Guaranty, no failure on the part of
the Beneficiary to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.

          SECTION 3.6.  Section Captions. Section captions used in this Guaranty
                        ----------------
are for convenience of reference only, and shall not affect the construction of
this Guaranty.

          SECTION 3.7.  Severability. Wherever possible each provision of this
                        ------------
Guaranty shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.

          SECTION 3.8.  Termination of Guaranty. The Guarantor's obligations
                        -----------------------
under this Guaranty shall terminate on the date upon which all Guaranteed
Obligations have been paid in full, and all other Obligations shall have been
fully and finally discharged.

          SECTION 3.9.  Governing Law. THIS GUARANTY SHALL BE GOVERNED BY AND
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CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATION LAW).

          SECTION 3.10. SUBMISSION TO JURISDICTION; WAIVERS. (a) THE GUARANTOR
                        -----------------------------------
HEREBY IRREVOCABLY AND UNCONDITIONALLY:

            (i)  SUBMITS FOR ITSELF AND ITS PROPERTY IN ALL LEGAL
     ACTIONS OR PROCEEDINGS RELATING TO THIS GUARANTY OR ANY OTHER OPERATIVE
     DOCUMENT TO WHICH IT IS A PARTY, TO THE GENERAL JURISDICTION OF THE SUPREME
     COURT OF THE STATE OF NEW YORK, AND THE APPELLATE COURTS THEREOF AND WAIVES
     THE RIGHT TO REMOVE ANY SUCH ACTION OR PROCEEDING TO ANY FEDERAL COURT;

            (ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
     SUCH COURT, WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE
     VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND WAIVES ANY
     OBJECTION THAT SUCH ACTION OR PROCEEDING IN ANY SUCH COURT WAS BROUGHT IN
     AN INCONVENIENT FORUM AND AGREES NOT TO PLEAD, CLAIM OR ASSERT THE SAME;
<PAGE>

            (iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
     PROCEEDING IN ANY SUCH COURT MAY BE EFFECTED BY MAILING A COPY THEREOF BY
     REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL),
     POSTAGE PREPAID TO, OR BY PERSONAL SERVICE AT, ITS ADDRESS SET FORTH HEREIN
     OR SUCH OTHER ADDRESS OF WHICH THE BENEFICIARY SHALL HAVE BEEN NOTIFIED
     PURSUANT HERETO, WHETHER OR NOT SUCH ADDRESS BE WITHIN THE JURISDICTION OF
     ANY SUCH COURT;

            (iv)  AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
     SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
     RIGHT OF THE BENEFICIARY (AND NOT OF GUARANTOR) TO SUE IN ANY OTHER
     JURISDICTION; AND

            (v)   WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
     IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED
     TO IN THIS SECTION 3.10 ANY SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES.

          (b)     THE GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY OR ANY
OTHER OPERATIVE DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

          (c)     THE GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
THE RIGHT TO ASSERT, ARGUE OR RAISE, IN ANY ACTION BROUGHT BY THE BENEFICIARY
AGAINST THE GUARANTOR UNDER THIS GUARANTY, THAT THE BENEFICIARY STRUCTURED THE
TRANSACTION CONTEMPLATED BY THE OPERATIVE DOCUMENTS IN SUCH A MANNER PRIMARILY
TO CIRCUMVENT THE CALIFORNIA ONE-FORM-OF-ACTION AND ANTI-DEFICIENCY LAWS,
INCLUDING CALIFORNIA CODE OF CIVIL PROCEDURE (S)(S) 580a, 580b, 580d AND 726.

          (d)     The Guarantor hereby waives all of the Guarantor's rights of
subrogation and reimbursement and any other rights and defenses available to the
Guarantor by reason of California Civil Code Sections 2787 to 2855, inclusive,
including (i) any defenses the Guarantor may have to the obligations undertaken
by the Guarantor in this Guaranty by reason of an election of remedies by the
Beneficiary, and (ii) any rights or defenses the Guarantor may have by reason of
protection afforded to the Lessor with respect to the obligations guaranteed
hereby pursuant to the antideficiency or other laws of the State of California
limiting or discharging Lessors's indebtedness, including California Code of
Civil Procedure Section 580a, 580b, 580d or 726. The Guarantor's waiver of
defenses under clause (i) above is made even though an election of remedies by
the Beneficiary, such as a nonjudicial
<PAGE>

foreclosure with respect to security for a guaranteed obligation, destroys such
Guarantor's rights of subrogation and reimbursement against the Lessor by the
operation of California Code of Civil Procedure Section 580d or otherwise. The
foregoing waivers shall not be deemed a waiver of the defense that the
Guaranteed Obligations have been paid or the Loan Commitments reduced.
<PAGE>

          IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.

                                             PALM, INC.

                                             By: /s/ Judy Bruner
                                                -------------------------------
                                                Name Judy Bruner
                                                Title: Chief Financial Officer