<PAGE>   1
                                                                   EXHIBIT 10.31


                 SEVERANCE AND SETTLEMENT AGREEMENT AND RELEASE


     AGREEMENT made as of the 4th day of December, 1996, by and between
ImmuLogic Pharmaceutical Corporation (the "Company") and Robert J. Gerety (the
"Employee").

     WHEREAS, the parties wish to resolve amicably the Employee's separation
from the Company and establish the terms of the Employee's severance
arrangement;

     NOW, THEREFORE, in consideration of the promises and conditions set forth
herein, the sufficiency of which is hereby acknowledged, the Company and the
Employee agree as follow:

     1.   Termination Date. The Employee's Termination Date will be December 4,
1996, the date upon which the Employee submitted and the Company accepted, the
Employee's letter of resignation as an officer and employee of the Company. A
copy of the aforementioned letter of resignation is attached hereto as Exhibit
A.

     2.   Monetary Consideration

          2.1 Severance Payments. The Company agrees to continue payment of the
Employee's base salary for a period of up to eight months beginning December 4,
1996 (the period during which such payments continue, as provided in the
following sentence, being referred to as the "Payment Period"). These payments
shall be discontinued at such time as the Employee obtains other comparable
employment, whether working for another company or self-employed. The Employee
shall notify the Company upon obtaining other employment and provide or cause to
be provided such information about his new employment as the Company may
reasonably request.

          2.2 Benefits. During the Payment Period, the Company will continue to
provide to the Employee the full benefits package which he was receiving from
the Company at the time he resigned his employment or its equivalent, said
benefits to include payment by the company of a life insurance premium due to be
paid in May, 1997. These benefits shall also be discontinued at such time as the
Employee obtains other comparable employment, whether working for another
company or self-employed.

          2.3 Amendment of Stock Option Agreement. The Employee currently holds
the following five stock options: (a) a Stock Option to purchase 120,000 shares
of Common Stock of the company (the "First Option") pursuant to a combined
Incentive


                                      -2-
<PAGE>   2
and Non-Qualified Stock Option Agreement dated 9/27/93 (the "First Option
Agreement"); (b) a Stock Option to purchase 30,000 shares of Common Stock of the
Company (the "Second Option") pursuant to a Non-Qualified Stock Option Agreement
dated 9/27/93 (the "Second Option Agreement"); (c) a Stock Option to purchase
150,000 shares of Common Stock of the Company (the "Third Option") pursuant to a
combined Incentive and Non-Qualified Stock Option Agreement dated 7/14/94 (the
"Fourth Option Agreement"); and (e) a Stock Option to purchase 150,000 shares of
Common Stock of the Company (the "Fifth Option") pursuant to a combined
Incentive and Non-Qualified Stock Option Agreement dated 1/2/95 (the "Fifth
Option Agreement"). The Company and the Employee agree as follows:

     (i)  Notwithstanding the exercise provisions of the First Option Agreement,
          the right of exercise with respect to those shares of Common Stock
          subject to the First Option vested as of December 4, 1996, is hereby
          extended from March 4, 1997 to August 4, 1997 (provided that those
          options not exercised within 90 days of the Termination Date shall not
          constitute an Incentive Stock Option). The provisions of this
          paragraph 2.3(I) shall constitute a written amendment to the First
          Option Agreement in accordance with the provisions of paragraph 14(a)
          of said First Option Agreement;

     (ii) Notwithstanding the exercise provisions of the Second Option
          Agreement, the right of exercise with respect to those shares of
          Common Stock subject to the Second Option vested as of December 4,
          1996, is hereby extended from March 4, 1997 to August 4, 1997
          (provided that those options not exercised within 90 days of the
          Termination Date shall not constitute a written amendment to the
          Second Option Agreement in accordance with the provisions of paragraph
          14(a) of said Second Option Agreement;

    (iii) Notwithstanding the exercise provisions of the Third Option Agreement,
          the right of exercise with respect to those shares of Common Stock
          subject to the Third Option vested as of December 4, 1996, is hereby
          extended from March 4, 1997 to August 4, 1997 (provided that those
          options not exercised within 90 days of the Termination Date shall not
          constitute an Incentive Stock Option). The provisions of this
          paragraph 2.3(iii) shall constitute a written amendment to the Third
          Option Agreement in accordance with the provisions of paragraph 14(a)
          of said Third Option Agreement;

     (iv) Notwithstanding the exercise provisions of the Fourth Option
          Agreement, the right of exercise with respect to those shares of
          Common Stock subject to the Fourth Option vested as of December 4,
          1996, is hereby extended from March 4, 1997 to August 4, 1997
          (provided that those options not exercised within 90 days of the
          Termination Date shall not constitute an Incentive Stock Option). The
          provisions of this paragraph 2.3(iv) shall


                                      -3-
<PAGE>   3
          constitute a written amendment to the Fourth Option Agreement in
          accordance with the provisions of paragraph 14(a) of said Fourth
          Option Agreement;

     (v)  Notwithstanding the exercise provisions of the Fifth Option Agreement,
          the right of exercise with respect to those shares of Common Stock
          subject to the Fifth Option vested as of December 4, 1996. is hereby
          extended from March 4, 1997 to August 4, 1997 (provided that those
          options not exercised within 90 days of the Termination Date shall not
          constitute an Incentive Stock Option). The provisions of this
          paragraph 2.3(v) shall constitute a written amendment to the Fifth
          Option Agreement in accordance with the provisions of paragraph 14(a)
          of said Fifth Option Agreement;

         In addition, the Company and the Employee agree that the total number
of shares of Common Stock that have vested as of December 4, 1996 and are
exercisable pursuant to the Option described above is as set forth on Exhibit B
which is attached hereto.

     3.   Release.

          3.1 Employee's Release. The Employee 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, reckoning,
covenants, contracts, agreements, promises, doing, 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, its officers, directors, stockholders, corporate affiliates, agents and
employees arising out of his employment or the termination of his employment,
including all employment discrimination claims under Title VII of the Civil
Rights Act , the Age Discrimination in Employment Act, 29 U.S.C. Section 200e et
seq., or the Massachusetts Civil Rights Act, the Age Discrimination in
Employment Act, 29 U.S.C. Section 621 et seq., M.G.L. c. 151B, Section 1 et
seq., the Americans With Disabilities Act, 29 U.S.C. Section 706 et seq., and
the National Labor Relations Act 29 U.S.C. Section 151 et seq.,; claims arising
under the Employee Retirement Income Security Act, 29 U.S.C. Section 1001 et
seq., and the Family and Medical Leave Act, 29 U.S.C. Section 2602 et seq.;
wrongful discharge claims, employment-related breach of contract claims and all
other employment-related statutory or common law claims and damages provided,
however, that nothing in this provision or in the Agreement shall be construed
as in any way barring claims for alleged breaches of this Agreement and provided
further that the Employee still retains such right to indemnification as
described in paragraph 10 below.

         The Employee 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 Agreement. The Employee may
revoke this


                                      -4-
<PAGE>   4
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.

          3.2 The Company's Release. The Company, for itself, its officers,
directors, stockholders, corporate affiliates, agents, employees, legal
representatives, successors and assigns, does hereby fully, forever, irrevocably
and unconditionally release, remise and discharge the Employee and his heirs,
successors and assigns 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 whatsoever, at law, in
equity or otherwise, which it or they ever had or now has against the Employee
arising out of his employment or the termination of his employment with the
Company. This Release shall not effect whatever indemnification rights the
Employee may have under the Company's By-laws or Charter or by operation of law.

     4.   Nature of Agreement. The Company and the Employee each represent and
warrant that this Agreement is a severance and settlement agreement and does not
constitute an admission of liability or wrongdoing on the part of either the
Company or the Employee.

     5. Amendment. This Agreement shall be binding upon the parties and may not
be abandoned, supplemented, changed or modified in any manner, orally or
otherwise, except by an instrument in writing of concurrent or subsequent date
signed by a duly authorized representative of the parties hereto. This Agreement
is binding upon and shall inure to the benefit of the parties and their
respective agents, assigns, heirs, executors, successors and administrators.

     6. Validity. Should any provision of this Agreement be declared or be
determined by any court of competent jurisdiction to be illegal or invalid, the
validity of the remaining parts, terms, or provisions shall not be affected
thereby and said illegal and invalid part, term or provisions shall be deemed
not to be a part of this Agreement.

     7. Confidentiality. The Employee and the Company understand and agree that
the terms and contents of this Agreement, the content of the negotiations and
discussions resulting in this Agreement, and the matters related to the
Employee's resignation shall all be maintained as confidential by both parties,
their agents and representatives, and that none of the above shall be disclosed,
except to the extent determined by either of the parties in the sole judgment of
each that such disclosure would be necessary to further a specific and
legitimate business interest of the Company or a specific and legitimate
business or professional interest of the Employee, or as may be required by
federal or state law or as otherwise agreed to in writing by the authorized
agent of each part. Notwithstanding the foregoing, the terms and contents of
this Settlement Agreement may be disclosed to the Employee's immediate family
members,


                                      -5-
<PAGE>   5
attorneys, and tax advisors and accountants. The parties represent and warrant
that, from December 4, 1994, until the date of execution of this Agreement they
(and each of them) have not disclosed the matters set forth herein to anyone
except as permitted above. Nothing in this provision shall be construed as
relieving either the Company or the Employee of their respective obligations
under paragraph 9 below nor as preventing the parties from complying with
compulsory legal process, making such disclosures as are necessary to obtain
legal advice and making disclosures which by law cannot be prohibited.

     8. Indemnification. The Company will continue indemnification of the
Employee to the extent that he is entitled to such indemnification as provided
in the Company's By-laws and Charter or under statutory or common law.

     9. Non-disparagement. The Employee agrees not to make any disparaging
statements to any other person concerning the Company, its officers, directors,
employees or agents, nor engage in conduct intended to be detrimental to the
interest of the Company, its officers, directors, employees or agents, provided,
however, that the Employee may make such disclosures as set forth in paragraph 7
above. The Company agrees that it will not make any disparaging statements to
any other person concerning the Employee nor engage in conduct intended to be
detrimental to the interests of the Employee, provided, however, that the
Company may make such disclosures as set forth in paragraph 7 above.

     10. Entire Agreement. This Agreement and the exhibits hereto contain and
constitute the entire understanding and agreement between the parties hereto
with respect to the severance and settlement and cancels all previous and oral
and written negotiations, agreements, commitments, and writings in connection
therewith.

     11. Applicable Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.

     12. Voluntary Assent. The Employee affirms that no other promises or
agreement 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 Employee states and represents
that he has had an opportunity to fully discuss and review the terms of this
Agreement with an attorney. The Employee further states and represents that he
has carefully read this Agreement, understands the contents herein, freely and
voluntarily assets to all of the terms and conditions hereof, and signs his name
of his own free act.

     13. Execution. This Settlement Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
and all such counterparts together shall constitute but one and the same
instrument.


                                      -6-
<PAGE>   6
     IN WITNESS WHEREOF, all parties have set their hand and seal to this
Agreement as of the date written above.


IMMULOGIC PHARMACEUTICAL CORPORATION

By:  _____________________________

/s/ Robert J. Gerety
-----------------------
    Robert J. Gerety







                                      -7-
<PAGE>   7




                                December 4, 1996



To Board of Directors:

         I hereby resign as the President and Chief Operating Officer and as a
Director of ImmuLogic Pharmaceutical Corporation ("ImmuLogic"), and from any
other office with ImmuLogic and/or any of its subsidiaries that I may hold,
effective immediately.


                                       /s/  Robert J. Gerety
                                       ---------------------------
                                            Robert J. Gerety











                                      -8-