<PAGE>

                            SEPARATION AGREEMENT AND
                          RELEASE AND WAIVER OF CLAIMS
                          ----------------------------


     This Separation Agreement and Release and Waiver of Claims (the
"Agreement") is entered into this 31 day of May, 1997, by and between BANYAN
SYSTEMS INCORPORATED, with offices at 120 Flanders Road, Westboro, Massachusetts
01581 ("Banyan") and DAVID C. MAHONEY, a resident of 103 Jimney Drive; Westford,
MA 01886 (the "Undersigned").

     For and in consideration of the mutual terms, conditions and covenants
herein, Banyan and the Undersigned agree as follows:

     1.   RESIGNATION OF EMPLOYMENT.  The Undersigned hereby resigns his
          -------------------------
position with Banyan as Chairman of the Board and Chief Executive Officer
effective April 1, 1997.  The Undersigned shall promptly execute and deliver to
Banyan a separate instrument embodying such resignation.

     2.   PAYMENT.  For and in consideration of the Undersigned's execution of
          -------
this Agreement, Banyan shall pay to the Undersigned the amount set forth in
Exhibit A, Section 1, less applicable deductions and/or withholdings for taxes
or similar governmental payments and charges, and further Banyan shall provide
the benefits set forth in Exhibit A, Sections 2-8.  In the event that Banyan
fails to provide any of the pay or benefits set forth in Exhibit A hereto, the
Undersigned shall be relieved of all further obligations to Banyan, its
subsidiaries and affiliates.

     3.   PUBLIC STATEMENT.  The Undersigned agrees that he will not
          ----------------
intentionally make or disclose or cause to be disclosed any negative, adverse or

                                       1
<PAGE>

derogatory comments about Banyan or its management, business, personnel or about
any product or service provided by Banyan, or about Banyan's prospects for the
future.  Banyan agrees that its officers, executives, and authorized
spokespersons will not intentionally make or disclose any negative, adverse or
derogatory comments about the Undersigned.

     4.   NON-COMPETITION AND NON-SOLICITATION.  The Undersigned agrees that
          ------------------------------------
from April 1, 1997 to September 30, 1998, he will not either directly or
indirectly, without Banyan's prior express written consent:

          a.   solicit or participate in the hiring of, or attempt to solicit or
participate in the hiring of, any employee of Banyan, either for himself or for
any other person or entity, excluding any general solicitation of employment not
specifically directed to employees of Banyan.

          b.   as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, consultant, or in any
other capacity whatsoever (other than as the holder of not more than one percent
of the combined voting power of the outstanding stock of a publicly held
company), develop, design, produce, market, sell or render (or assist any other
person in developing, designing, producing, marketing, selling or rendering)
products or services competitive with those produced, marketed, sold or rendered
by the Company while the Undersigned was employed by the Company; or

          c.   solicit, divert or take away, or attempt to take away, the
business or patronage of any of the clients, customers or accounts, or
prospective clients,

                                       2
<PAGE>

customers or accounts, of the Company which were contacted, solicited or served
personally by the Undersigned while employed by the Company.

     If the Undersigned violates the provisions of this section, the Undersigned
shall continue to be bound by the restrictions set forth in this section until a
period of one year has expired without any violation of such provisions.

     5.   RELEASE.  The Undersigned hereby fully, forever, irrevocably and
          -------
unconditionally releases, remises and discharges the Company, its officers,
directors, stockholders, corporate affiliates, agents and employees from any and
all claims, charges, complaints, demands, actions, causes of action, suits,
rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts,
agreements, promises, doings, omissions, damages, executions, obligations,
liabilities, and expenses (including attorneys' fees and costs), of every kind
and nature which he ever had or now has against the Company, whether known or
unknown, its officers, directors, stockholders, corporate affiliates, agents and
employees, including, but not limited to, all claims arising out of his
employment, all employment discrimination claims under Title VII of the Civil
Rights Act of 1964, 42 U.S.C. (S)2000e et seq., the Age Discrimination in
                                       -- ----
Employment Act, 29 U.S.C., (S)621 et seq., the Americans With Disabilities Act,
                                  -- ----
42 U.S.C., (S)12101 et seq., M.G.L. c.151B, (S)1 et seq., all claims arising out
                    -- ----                      -- ----
of the Massachusetts Civil Rights Act, M.G.L. c.12 (S)(S)11H and 11I and the
Massachusetts Equal Rights Act, c.93, (S)102, damages arising out of all
employment discrimination claims, wrongful discharge claims or other common law
claims and damages.

                                       3
<PAGE>

     Banyan on it's own behalf and on the behalf of its subsidiaries and
affiliates, hereby fully, forever, irrevocably and unconditionally releases,
remises and discharges the Undersigned, his heirs, executors, administrators,
personal representatives and assigns, from any and all claims, charges,
complaints, demands, actions, causes of action, suits, rights, debts, sums of
money, costs, accounts, reckoning, covenants, contracts, agreements, promises,
doings, omissions, damages, executions, obligations, liabilities, and expenses
(including attorneys' fees and costs), of every kind and nature which Banyan or
any of its subsidiaries or affiliates ever had or now has against the
Undersigned, whether know or unknown.

     6.   WARRANTY ON LEGAL ACTION.  The Undersigned further represents and
          ------------------------
warrants that he has not filed any complaints, charges or claims for relief
against the Company, its officers, directors, stockholders, corporate
affiliates, agents or employees with any local, state or federal court or
administrative agency which currently are outstanding.

     7.   REMEDIES.  If at any time during the term of this Agreement, either
          --------
party believes that the other party has breached any material obligations or
covenants hereunder, the non- breaching party promptly shall give the other
party written notice of the same.  In the event that the other party does not
promptly cure such breach (if such breach is susceptible of cure), the non-
breaching party may, at its option, commence an action at law or equity, against
the other party including, but not limited to, injunctive relief.

                                       4
<PAGE>

     8.   GOVERNING LAW; SEVERABILITY.  This Agreement is entered into and shall
          ---------------------------
be construed pursuant to the laws of The Commonwealth of Massachusetts,
excluding its conflicts of law rules.  In the event any provision of this
Agreement is determined to be illegal or unenforceable by a duly authorized
court of competent jurisdiction, then the remainder of this Agreement, or the
application of such provision in circumstances other than those as to which it
is so declared illegal or unenforceable, shall not be affected thereby, and each
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.

     9.   WAIVERS; AMENDMENTS.  The failure of either party to require the
          -------------------
performance of any term or obligation of this Agreement, or the waiver by either
party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation and shall not be deemed a waiver of any
subsequent breach.  No modification or waiver of any provision of this Agreement
shall be effective unless in writing and signed by both parties.

     10.  NON-ADMISSION.  Banyan expressly disclaims any wrongdoing to the
          -------------
Undersigned and the Undersigned agrees that by entering into this Agreement
Banyan admits no wrongdoing.  The Undersigned expressly disclaims any wrongdoing
to Banyan and Banyan agrees that by entering into this Agreement the Undersigned
admits no wrongdoing.

     11.  ACKNOWLEDGMENTS.  The Undersigned acknowledges that he has been given
          ---------------
twenty-one (21) days to consider this Agreement and that the Company advised him
to consult with an attorney of his own choosing prior to signing this

                                       5
<PAGE>

Agreement. The Undersigned may revoke this Agreement for a period of seven (7)
days after the execution of this Agreement, and the Agreement shall not be
effective or enforceable until the expiration of this seven (7) day revocation
period. The Undersigned affirms that no other promises or agreements of any kind
have been made to or with him by any person or entity whatsoever to cause him to
sign this Agreement, and that he fully understands the meaning and intent of
this Agreement. The Undersigned states and represents that he has had an
opportunity to fully discuss and review the terms of this Agreement with an
attorney. The Undersigned further states and represents that he has carefully
read this Agreement, understands the contents herein, freely and voluntarily
assents to all of the terms and conditions hereof, and signs his name of his own
free act.

     12.  CHALLENGE TO VALIDITY OF AGREEMENT.  Neither party shall ever bring a
          ----------------------------------
proceeding to challenge the validity of this Agreement.

     13.  ENTIRE AGREEMENT.  This Agreement and the Exhibits attached hereto set
          ----------------
forth the full terms of the arrangement between Banyan and the Undersigned and
supersedes any prior oral or written understandings.  Notwithstanding the
foregoing, nothing in this Agreement shall be deemed to affect the application
and enforceability of the Employee Patent and Confidential Information Agreement
executed by the Undersigned and all rights of the Undersigned to indemnification
by Banyan, its subsidiaries and affiliates, whether under charter, by-laws or
otherwise, including without limitation indemnification with respect to the
service of the Undersigned as

                                       6
<PAGE>

an officer or director of Banyan, its subsidiaries or affiliates or others
served at Banyan's request and as a fiduciary of Banyan's 401(k) plan.

     14.  SIGNATURE.  This Agreement may be signed on one or more copies, each
          ---------
of which when so signed will be deemed to be an original, and all of which
together will be one and the same document.

     15.  CONFIDENTIALITY OF AGREEMENT.  The parties agree that the terms of
          ----------------------------
this Agreement are confidential and shall not be disclosed to any other person,
except that the Undersigned may disclose the terms of this Agreement to his
immediate family, attorney, any tax or other professional advisors, or as
otherwise required by law or regulation, and that Banyan may disclose the terms
of this Agreement to its attorneys, tax or other professional advisors, its
personnel who have a need to know, or as otherwise required by law or
regulation.

     16.  EFFECTIVE DATE.  This Agreement shall become effective immediately
          --------------
upon execution by both parties, subject to the Undersigned's right to revoke as
set forth below.  The Undersigned may revoke this Agreement within seven (7)
days after it is signed by the Undersigned, and it shall not become effective or
enforceable until this seven (7) day revocation period has expired.

                                       7
<PAGE>

IN WITNESS WHEREOF, THE PARTIES HAVE HEREUNTO SET THEIR NAMES ON MAY 31,1997.
THE UNDERSIGNED HAS BEEN OFFERED THE OPPORTUNITY TO SEEK ADVICE OF COUNSEL PRIOR
TO EXECUTING THIS AGREEMENT.  BOTH PARTIES HAVE READ, UNDERSTAND AND AGREE TO BE
BOUND BY THIS AGREEMENT.


DAVID C. MAHONEY                         BANYAN SYSTEMS INCORPORATED

By:  /s/ David C. Mahoney                By:  /s/ John F. Burton
   ---------------------------------        ---------------------------------
Date:  May 31, 1997                      Date:  May 31, 1997

                                       8
<PAGE>

                               DAVID C.  MAHONEY
                               -----------------
                                   EXHIBIT A
                                   ---------
             SEPARATION AGREEMENT AND RELEASE AND WAIVER OF CLAIMS
             -----------------------------------------------------

     For and in consideration of the Undersigned's execution of this Agreement,
Banyan shall: (i) pay to the Undersigned, as applicable, the amounts set forth
in Section 1 below, less any applicable withholdings for taxes or similar
governmental payments or charges; and (ii) provide the benefits set forth in
Sections 2 through 8 below.

     1.   PAYMENT AMOUNT.
          --------------

          a.   Banyan shall provide the Undersigned with a 15-month consulting
fee totaling $312,500.00 for the period of April 1, 1997 through June 30, 1998.
This consulting fee will be paid on normal bi-weekly pay periods at the
Undersigned's base, bi-weekly pay rate of $9,615.38.  In addition, the
Undersigned will be compensated at the rate of $2,000.00 per day for specific
consulting assignments requested and scheduled by Banyan (Exhibit B, Consulting
Agreement). The Undersigned shall perform, as an independent contractor and not
as an employee of Banyan, the consulting services described on Exhibit B solely
in accordance with the terms and conditions of the Banyan Consulting Agreement
attached hereto as Exhibit B ("Consulting Agreement").  Nothing in this
Agreement or in the Consulting Agreement shall be construed to mean that the
Undersigned has assumed a "Banyan employee" status by the performance of
consulting services for Banyan.  The provisions of the Consulting Agreement are
solely limited to such

                                       9
<PAGE>

Consulting Agreement and shall not apply to this Agreement and the provisions of
the Consulting Agreement shall exclusively govern the provision of consulting
services to Banyan thereunder.

     2.   MEDICAL DENTAL AND PRESCRIPTION DRUG BENEFITS.
          ---------------------------------------------

          a.   The Undersigned may elect to continue coverage of Company-
sponsored health and dental insurance for up to 18 months under the applicable
COBRA statute.  Banyan shall assume the full payment of all associated COBRA
expenses for the 18-month period which runs from April 1, 1997 through June 30,
1998.  At the end of this period, the Undersigned may elect to continue COBRA at
his expense.  The Undersigned shall receive notification of his COBRA rights
immediately following the execution of this Agreement.

          b.   Banyan will reimburse the Undersigned for insurance premiums
associated with the Undersigned's purchase of up to $1,000,000 of term life
insurance for the period of April 1, 1997 through June 30, 1998.

     3    STOCK OPTIONS.
          --------------

          a.   On the date hereof, the Company will (i) cancel the stock options
held by the Employee set forth on Exhibit C hereto and (ii) grant to the
Undersigned a nonqualified stock option (the "Stock Option") to purchase 72,500
shares of Common Stock of the Company ("Common Stock") at a per share exercise
price of $4.00 per share.  The Stock Option will be granted pursuant to the
Company's 1992 Stock Incentive Plan, as amended, and will be substantially in
the form attached as Exhibit C hereto.  The Stock Option shall be fully
exercisable (72,500 shares) on

                                       10
<PAGE>

April 1, 1998 and may be exercised during the period commencing on April 1; 1998
and ending on April 1, 1999.

     b.   The Undersigned may exercise Incentive Stock Options granted on March
2, 1988 (40,000 shares) and January 1, 1991 (50,000 shares) through the period
ending September 30, 1998.  Banyan makes no representation that any Incentive
Stock Options will be treated as Incentive Stock Options for tax and financial
purposes.

     4.   CHANGE IN CONTROL.  For purposes of this Agreement, a Change in
          -----------------
Control shall be deemed to have taken place when (i) stockholders of Banyan
approve a definitive agreement for the sale or other disposition of all or
substantially all of the assets of Banyan, the merger or other business
combination of Banyan with or into another corporation pursuant to which Banyan
will not survive or will survive only as a subsidiary of another corporation or
(ii) a person or entity (other than Banyan) becomes a beneficial owner (within
the meaning of Rule 13d-3, as amended, promulgated under the Securities Exchange
Act of 1934), directly or indirectly, of securities representing [20]% or more
of the total number of votes that may be cast for the election of directors of
Banyan.  Upon such events, Banyan shall:

          a.   pay the Undersigned the balance of the 15-month consulting fee in
full, defined in Section 1a;
          b.   provide equivalent benefits or funding to purchase equivalent
benefits defined in Section 2a; and
          c.   fully accelerate the vesting of 72,500 shares of Common Stock
defined in Section 3a.

                                       11
<PAGE>

     5.   VACATION PAY.  The Undersigned acknowledges that he has received all
          ------------
of the vacation pay due him as an employee.

     6.   DIRECTORS AND OFFICERS LIABILITY INSURANCE.  Banyan acknowledges that
          ------------------------------------------
it has maintained Directors and Officers Liability Insurance coverage under
terms, conditions and policy limits selected by Banyan at its sole discretion
for directors and officers of Banyan during the period of the Undersigned's
employment with Banyan and his directorship with Banyan.  Such insurance shall
apply to the extent of the applicable policy terms, conditions and limits to the
Undersigned in the event of a claim against Banyan which names the Undersigned
as an officer of Banyan for any period of time during which the Undersigned was
an officer of Banyan.

     7.   LEGAL FEES.  Banyan agrees to pay the legal fees associated with the
          ----------
defense of any legal action filed, at any time, against the Undersigned with
respect to his role as Chief Executive Officer, Chairman of the Banyan Board of
Directors, or as a member of the Banyan Board of Directors, as a member of any
other board of directors at the direction or request of Banyan or as a fiduciary
of any employee benefit plan of Banyan, including without limitations its 401(k)
plan.

     8.   OFFICE AND ADMINISTRATIVE Support.  Banyan will reimburse the
          ---------------------------------
Undersigned for actual office and administrative support or, at his option, for
outplacement services, up to $3,000 per month for the earlier of the period of
April 1, 1997 through June 30, 1998 or when the Undersigned begins regular full-
time employment.

                                       12
<PAGE>

                                   EXHIBIT B
                                   ---------

                          BANYAN SYSTEMS INCORPORATED

                              CONSULTING AGREEMENT

THIS AGREEMENT is made and entered into as of the 31 day of May, 1997, between
BANYAN SYSTEMS INCORPORATED, a corporation organized under the laws of the
Commonwealth of Massachusetts, having a principal place of business at 120
Flanders Road, Westboro, Massachusetts 01581 (hereinafter referred to "Banyan"),
and DAVID C. MAHONEY, an individual Consultant residing at 103 Jimney Drive;
Westford, MA 01886 (hereinafter referred to as ("Consultant").

1.   INDEPENDENT CONSULTING SERVICES.  Banyan hereby retains Consultant and
     -------------------------------
     Consultant hereby agrees to perform the consulting services as assigned and
     directed by Banyan's Chief Executive Officer, upon the terms and conditions
     contained herein ("Services") for a period of time beginning on April 1,
     1997 and ending on June 30, 1998.  Banyan agrees that any services to be
     provided by consultant hereunder shall not conflict with or limit
     Consultant's rights to pursue other full-time business activities.

2.   FEES FOR SERVICES.
     -----------------

     a.   in consideration for Consultant's performance of the Services, Banyan
          will pay Consultant for the Services as set forth in this Section 2.a.
          ("Fee(s)").

          Fees:  $2,000 per day.

     b.   Consultant shall be responsible for all taxes, levies, and fees which
          may be due any governmental taxing authority arising out of
          performance of the Services, as well as all insurance premiums,
          employee benefits and all other fees and assessments associated and
          with respect to such Services, and shall hold Banyan harmless on
          account thereof.

     c.   Banyan shall pay Consultant on a bi-weekly basis commencing on
          April 1, 1997, and upon receipt of a correct Consultant invoice,
          subject to verification of the appropriate fees and expenses.

     d.   Consultant shall perform the services as agreed by the parties and
          have access to the equipment, facilities and services as outlined in
          attached SCHEDULE 1.
                   ----------

     e.   Banyan agrees to pay the Consultant's consulting company, Falcon, a
          retainer fee of $48,076.92 upon execution of this Agreement.

3.   RELATIONSHIP BETWEEN THE PARTIES.  It is agreed that the relationship of
     --------------------------------
     Consultant to Banyan is solely that of an independent consultant.
     Consultant is not and will not represent that he is an agent(s) and/or
     employee(s) of Banyan and shall have no power, express or implied, to bind
     Banyan in any manner.  Consultant shall

                                       13
<PAGE>

     make no representations or warranty whatsoever with regard to Banyan
     including but not limited to any warranties or representations relating to
     Banyan's products or services, and shall incur no liability, or expense,
     nor make any commitments, on behalf of Banyan.

4.   LOAN OF BANYAN PROPERTY.  In the event that Banyan decides to loan and/or
     -----------------------
     temporarily license any Banyan property and/or products to Consultant for
     use by Consultant in performing the Services, such loan or license shall be
     governed by the terms of a separate agreement(s) between Banyan and
     Consultant.  Unless such agreement(s) states otherwise, all loaned property
     and/or licensed products shall be returned to Banyan on completion of
     Services or otherwise as requested by Banyan.

5.   INTELLECTUAL PROPERTY.
     ---------------------

     a.   Confidentiality information.  Consultant shall hold confidential all
          ---------------------------
          of Banyan's Confidential information (as defined herein) and shall
          not, during or after the term of this Agreement, use any of Banyan's
          Confidential Information, or any part thereof, for any purpose other
          than those uses specifically permitted in writing by Banyan.
          Consultant shall not, during or after the term of this Agreement,
          disclose to individuals or entities any of Banyan's Confidential
          Information for any reason or purpose whatsoever, except as may be
          specifically authorized in writing by Banyan.  "Confidential
          Information" shall include, but not be limited to, computer programs,
          source code, algorithms, drawings, designs, techniques, methodology,
          know-how, formulas, swap processes, ideas, inventions (whether
          patentable or not), schematics, copyrights, trade secrets and the
          intellectual processes and actual expressions and articulations
          relating to the Banyan's products; names and expertise of employees
          and consultants; information specifically related to research and
          development work of Banyan; statistical, technical, engineering and
          test data; and any other technical, financial, strategic, marketing or
          other information which Consultant learns or receives from Banyan,
          whether disclosed orally, in writing or via any other medium.
          Consultant agrees that it will not use for its own benefit or,
          directly or indirectly, disclose to or use for the benefit of any
          third party any such Confidential information without Banyan's prior
          written consent.

     b.   Injunctive Relief.  Consultant acknowledges that disclosure of any
          -----------------
          Confidential Information will give rise to irreparable injury to
          Banyan or the owner of such information, inadequately compensable in
          damages.  Accordingly, Banyan or such other party may seek and obtain
          injunctive relief against the breach or threatened breach of the
          disclosure of such Confidential Information, in addition to any other
          legal remedies which may be available.  Consultant further
          acknowledges and agrees that the covenants contained herein are
          necessary for the protection of Banyan's legitimate business interests
          and are reasonable in scope and content.

     c.   Proprietary Rights.  All information and documentation, however
          ------------------
          characterized, which is generated by Consultant in connection with
          this Agreement and/or in the course of performing the Services,
          including but not

                                       14
<PAGE>

          limited to all materials, products, Software code and deliverables, as
          well as all intellectual property rights embodied therein, including
          ideas, concepts, inventions (whether or not patentable), copyrights,
          designs, etc., shall belong solely and exclusively to Banyan,
          regardless of the extent to which any of the foregoing may or may not
          constitute a work for hire by operation of law (individually and
          collectively referred to as "Property"). Title to the Property shall
          vest on creation, regardless of the state of completion at any given
          point in time. All rights, title and interest to the Property shall
          be, and is intended by Consultant to be, hereby irrevocably assigned
          to Banyan, without reservation. Unless otherwise requested by Banyan,
          upon the completion of the Services, or upon the earlier termination
          of this Agreement in accordance with the terms of this Agreement,
          Consultant and its employees and/or agents shall immediately turn over
          to Banyan all materials and deliverables developed pursuant to this
          Agreement. Consultant agrees to execute all documentation (including
          assignments) and provide whatever other assistance is necessary in
          order for Banyan to be able to perfect and enforce its rights and
          interests in the Property.

6.   CONSULTANT WARRANTIES.  Consultant hereby warrants that Consultant is
     ---------------------
     qualified to perform the Services in accordance with the highest
     professional and recognized standards within this industry, and has
     extensive experience in performing services which are similar to and/or
     essentially the same as the Services.

7.   INDEMNIFICATION.  Consultant hereby indemnifies and holds Banyan, its
     ---------------
     officers, directors, and employees harmless from and against any and all
     claims, losses, costs, expenses, penalties, damages, liabilities, suits for
     injury to any person(s) (including Consultant and/or its employees), damage
     to or loss of property, including reasonable attorneys' fees, which may be
     claimed, alleged or actually incurred by reason, arising out of, or
     resulting from any act or omission of Consultant, the performance or any
     failure to perform the Services, the presence of Consultant on Banyan
     property, or the operation of any Banyan motor vehicle, product, or
     equipment, Consultant's negligence and/or intentional wrongdoing in
     relation to the terms, conditions and/or subject matter of this Agreement,
     or by reason of a determination at any time in the future by the internal
     Revenue Service that Consultant was or is an employee(s) and/or agent(s) of
     Banyan.

     Consultant shall, in addition, provide Banyan with immediate written notice
     if Consultant has any reason to believe that any third party has brought or
     may bring a claim with regard to any intellectual property provided to
     Banyan by Consultant with regard to the Services.  Consultant agrees to
     indemnify and hereby holds Banyan harmless from all liability arising Out
     of any use by Banyan of such intellectual property.

8.   TERM AND TERMINATION.  This Agreement shall commence on April 1, 1997, and
     --------------------
     shall continue in full force and effect for a period of 15 months ending on
     June 30, 1998, unless earlier terminated in accordance with the provisions
     of this Agreement.

                                       15
<PAGE>

     In the event of any material breach of this Agreement by either party, the
     other party may immediately cancel this Agreement by giving written notice
     thereof.

9.   NON-RECRUITMENT.  Consultant shall not directly or indirectly attempt to
     ---------------
     solicit or induce any employee of Banyan to work for any other person or
     company.

10.  ASSIGNMENT.  Consultant may not assign any of its rights or duties under
     ----------
     this Agreement to a third party without Banyan's prior written
     authorization in each instance.

11.  NOTICES.  All notices, requests, demands and other communications hereunder
     -------
     shall be in writing and shall be deemed to have been duly given if
     personally delivered or if sent by telecopier, or mailed by certified or
     registered mail, postage prepaid, to the addresses set forth on the first
     page hereof or to such other persons and/or addresses as either party shall
     give upon their notice to the other.

12.  BINDING EFFECT.  This Agreement shall be binding upon and inure to the
     --------------
     benefit of the parties hereto and their successors and permitted assigns.

13.  CHOICE OF LAW.  This Agreement shall be governed by and interpreted in
     -------------
     accordance with the laws of the Commonwealth of Massachusetts with the
     exception of its conflicts of law provisions to the extent they would
     require that the laws and/or courts of another jurisdiction would apply.
     No waiver by any party or breach of any term hereunder shall be construed
     as a waiver of any subsequent breach of that term or of any other term of
     the same or different nature.

14.  GOVERNMENT CONTRACTS.  if the Services to be performed by Consultant are in
     --------------------
     relation to a U.S. Government contract involving Banyan, the Banyan
     addendum concerning compliance with 31 USC 1352 and FAR 52.203-11 is
     incorporated in this Agreement by reference.

15.  LIMITATION OF LIABILITY.  IN NO EVENT SHALL BANYAN BE LIABLE FOR ANY
     -----------------------
     DIRECT, INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, HOWEVER
     CHARACTERIZED, TO THE FULLEST EXTENT THE LAW PERMITS SUCH DISCLAIMER, AND
     EVEN IF BANYAN HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.  IN NO
     EVENT SHALL BANYAN'S CUMULATIVE AGGREGATE LIABILITY, IN CONTRACT AND AT LAW
     AND IRRESPECTIVE OF FAULT OR NEGLIGENCE, EXCEED THE FEE PAID BY BANYAN
     PURSUANT TO THIS AGREEMENT.

16.  ENTIRE AGREEMENT.  This Agreement contains the entire agreement between the
     ----------------
     parties relating to the subject matter hereof and supersedes all previous
     agreements of the parties, whether oral or written, with respect to the
     subject matter hereof.  This Agreement may not be modified, altered or
     amended except by a writing signed by each of the parties.

17.  SURVIVAL.  Notwithstanding expiration or earlier termination of this
     --------
     Agreement, the following provisions shall survive: 3.  RELATIONSHIP BETWEEN
                                                            --------------------
     THE PARTIES, 5.  INTELLECTUAL PROPERTY, 6.  CONSULTANT WARRANTIES, 7.
     -----------      ---------------------      ---------------------
     INDEMNIFICATION, 13.   CHOICE OF LAW and 15.  LIMITATION OF LIABILITY.
     ---------------        -------------          -----------------------

                                       16
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement through
their representatives duly authorized as of the date and year first written
above.

BANYAN SYSTEMS INCORPORATED                DAVID C. MAHONEY
                                           "Consultant")


By:  /s/ John F. Burton                    By:  /s/ David Mahoney
   ---------------------------------          ---------------------------------
Print Name:  John F. Burton                Print Name:  David Mahoney
Title:  Chairman                           Title:
Date:  5/31/97                             Date:  5/31/97

                                       17
<PAGE>

                                   SCHEDULE I
                                   ----------

                          BANYAN SYSTEMS INCORPORATED

                              CONSULTANT AGREEMENT



1.   Continued use of Banyan networking facilities and maintenance of both
     Streettalk name (dmahoney@admin@banyan) and Internet ID
     (dmahoney@banyan.com).

2.   Telephone extension 1606 remaining active and attended by voice mail only.

3.   Scheduling of company related travel via Banyan travel office.

                                       18
<PAGE>

                                   EXHIBIT C
                                   ---------

                          BANYAN SYSTEMS INCORPORATED

                            CANCELLED STOCK OPTIONS


<TABLE>
<CAPTION>
 Number of Shares             Exercise Price             Date of Grant
------------------------------------------------------------------------
<S>                           <C>                       <C>
      75,000                      $  7.50                June 23, 1992
------------------------------------------------------------------------
      40,000                      $17.375                February 1, 1995
------------------------------------------------------------------------
      30,000                      $  8.00                March 18, 1996
------------------------------------------------------------------------
</TABLE>

                                       19