<PAGE>   1
                                                                   EXHIBIT 10.31


                     SETTLEMENT AGREEMENT AND MUTUAL RELEASE


              This SETTLEMENT AGREEMENT AND MUTUAL RELEASE of claims is made by
U.S. HomeCare Corporation, its past, present and future partners, parents,
subsidiaries, related entities, predecessors, successors, directors, officers,
agents, employer sponsored employee benefit and welfare benefit plans, trustees
and administrators of such plans, employees, contractors and assigns
(hereinafter "USHO") and G. Robert O'Brien and his predecessors, successors,
agents, heirs and assigns (hereinafter "Employee"). USHO and Employee shall
hereafter collectively be referred to as the "Parties."

                                   WITNESSETH:

              WHEREAS, G. Robert O'Brien has been an employee of USHO pursuant
to an employment agreement, dated August 10, 1994 (the "Employment Agreement");

              WHEREAS, pursuant to the Employment Agreement the Employee is
entitled to a severance package consisting of cash and other benefits; and

              WHEREAS, the Parties wish to sever their relationship and settle
any outstanding severance obligations and any and all disputes which may exist
between them;

              NOW, THEREFORE, for and in consideration of the representations
made, actions and agreements to be undertaken, and payments to be made as set
forth herein, the Parties agree to fully and forever release and discharge each
other, and covenant not to sue or otherwise institute or cause to be instituted,
or maintain any legal or administrative proceedings against each other with
respect to any matter, including but not limited to claims and causes of action
relating to Employee's employment with USHO and/or the termination of his
employment, including, without limitation, any rights set forth in Section 4 of
the Employment Agreement, provided, however, that nothing in this Agreement
shall be deemed to release USHO from any preexisting obligation to indemnify
Employee in connection with his services as an officer and director of USHO.

              This SETTLEMENT AGREEMENT AND MUTUAL RELEASE is made in
consideration of the following:

              A.  Employee agrees that his employment with USHO will terminate
effective as of the date hereof (the "Termination Date"). Employee will have no
right to employment with USHO after the date hereof.
<PAGE>   2
              B.  Pursuant to Employee's existing stock option agreements with
USHO, an aggregate of 500,000 shares of USHO's Common Stock are vested and
exercisable by Employee. Pursuant to Section 3.03 of such option agreements, no
additional portion of any such option shall vest, but the vested portion may be
exercised in whole or in part within three (3) months of the date hereof.

              C.  Employee hereby resigns as Chief Executive Officer and
director of USHO effective November 4, 1996. Employee hereby resigns as member
of the Executive Committee of USHO effective immediately.

              D.  USHO shall pay Employee (i) $87,5000, to be paid $21,875 per
month for four months and (ii) $150,000, to be paid $6,250 per month for the
twenty-four months following the time period of section (i) of this Paragraph.
Payments shall be made in arrears every two weeks in accordance with USHO's
standard payroll practices. The payments made pursuant to this Paragraph D (the
"Payments") are in addition to Employee's salary through the date hereof. The
Payments are made in consideration of the representations made and actions and
agreements to be undertaken as set forth herein, are not made in compensation
for services as an employee of USHO, and are not intended to be subject to FICA,
Medicare, or other taxes or withholdings.

              E.  In consideration of the payments made by USHO pursuant to
Section C(i) hereof, USHO agrees to engage Employee, and Employee accepts such
engagement, as a consultant to USHO for a four-month period commencing on the
date hereof, pursuant to a consulting agreement in the form attached hereto as
Exhibit A (the "Consulting Agreement").

              F.  USHO shall grant to Employee on November 15, 1996 a stock
award of 85,000 shares of USHO Common Stock pursuant to the terms of Article III
of the 1995 Stock Option/Stock Issuance Plan.

              G.  Employee shall retain possession of the automobile provided to
him by USHO until December 13, 1996, on which date Employee shall relinquish all
rights to said automobile and shall make it available to USHO at its office in
Hartford, Connecticut.

              H.  Employee will remain eligible to participate in USHO's health
insurance, life insurance and disability insurance programs for three months
from the date hereof (the "Benefit Period") unless and until Employee commences
full-time employment with another employer. Employee understands that his
entitlement to any benefit continuation following the end of the Benefit Period
will be governed by COBRA and will be at Employee's expense. Employee
understands that his vacation accrual will cease effective on the date hereof
and agrees that accrued vacation pay, if any, is satisfied by the payments made
to Employee pursuant to Paragraph D above.
<PAGE>   3
              I.  Employee acknowledges that the payments made hereunder are not
part of an exit incentive or other employment termination program offered to a
group or class of employees.

              J.  Employee and USHO represent that they are not currently
involved, directly or indirectly, in any legal or administrative proceedings
against one another, and have not engaged in any efforts, plans or preparation
to become so involved in the future.

              K.  The Parties understand and agree that they are waiving any
rights that they may have or now have, known or unknown, to pursue 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, known or unknown, against USHO, its
officers, directors, stockholders, corporate affiliates, agents and employees,
including, but not limited to, all claims arising out of his employment
relationship with USHO, all employment discrimination claims under Title VII of
the Civil Rights Act of 1964, 42 U.S.C. Section 2000e et seq., the Age
Discrimination in Employment Act, 29 U.S.C. Section 621 et seq., and the
Connecticut General Statutes, damages arising out of all employment
discrimination claims, wrongful discharge claims or other common law claims and
damages. Nothing in this SETTLEMENT AGREEMENT AND MUTUAL RELEASE, however, shall
be construed as releasing USHO from its obligations under this SETTLEMENT
AGREEMENT AND MUTUAL RELEASE and the exhibits hereto nor shall anything in this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE be deemed to release USHO from any
preexisting obligation to indemnify Employee in connection with his services as
an officer and director of USHO.

              L.  In addition, and in further consideration of the foregoing,
the Parties agree that nothing contained in this SETTLEMENT AGREEMENT AND MUTUAL
RELEASE shall constitute or be treated as an admission of liability or
wrongdoing by USHO or Employee.

              M.  This SETTLEMENT AGREEMENT AND MUTUAL RELEASE is deemed to have
been entered into in the State of Connecticut and shall be construed and
interpreted in accordance with the laws of that state.

              N.  In addition, and in further consideration of the foregoing,
this release extends to claims which the Parties do not know or suspect to exist
in their favor at the time of executing the mutual release, which if known by
them must have materially affected this settlement.


                                       3.
<PAGE>   4
              O.  The Parties agree that they will not, without compulsion of
legal process, disclose to others the terms or amounts referred to in this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE or the fact of the payment of said
amounts, except that they may disclose them to their attorneys, accountants or
other professional advisors to whom the disclosure is necessary to effect the
purposes for which they have consulted such professional advisors. The Parties
further agree that they will not defame or disparage each other.

              P.  The Parties understand that the covenants contained in this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE, including the covenants of
nondisclosure, non-defamation and non-disparagement, are material inducements
for the making of this agreement and that, in the event of a material breach
hereof, including, without limitation, the nonpayment of any amounts payable
hereunder, the other party will be entitled to pursue its legal and equitable
remedies, including without limitation, the right to recover damages and seek
injunctive relief. The prevailing party in any such action shall be entitled to
recover its costs and reasonable attorneys' fees. Furthermore, in the event that
Employee files or commences any legal action or administrative proceeding
against USHO for any matter other than enforcement of Employee's rights under
this SETTLEMENT AGREEMENT AND MUTUAL RELEASE, the Consulting Agreement, or any
indemnification obligation not released hereby, USHO shall, in addition to any
available legal and equitable remedies, not be obligated to make any future
payments of any amounts which would otherwise be due under Paragraph D.

              Q.  The Parties acknowledge and agree that no promises or
representations were made which do not appear written in this Agreement and the
Consulting Agreement and that this SETTLEMENT AGREEMENT AND MUTUAL RELEASE,
including the Consulting Agreement, contains the entire agreement of the Parties
as to the subject matter hereof. This SETTLEMENT AGREEMENT AND MUTUAL RELEASE
shall be construed to be fully enforceable. If for any reason any part of this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE is determined to be void or
unenforceable, the agreement and/or any remaining part hereof shall be construed
without reference to such void or inapplicable provisions to be an enforceable
SETTLEMENT AGREEMENT AND MUTUAL RELEASE between the Parties.

              R.  The Parties acknowledge that they have read and understand the
foregoing SETTLEMENT AGREEMENT AND MUTUAL RELEASE and that they sign it
voluntarily and without coercion. They further acknowledge that they have been
advised by and been given the opportunity to consult with an attorney of their
own choosing concerning the waivers contained in this SETTLEMENT AGREEMENT AND
MUTUAL RELEASE and that the waivers made herein are knowing, conscious and with
full appreciation that such party is forever foreclosed from pursuing any of the
rights so waived. Employee further acknowledges that he has twenty-one (21) days
after receipt of this SETTLEMENT AGREEMENT AND


                                       4.
<PAGE>   5
MUTUAL RELEASE to consider this SETTLEMENT AGREEMENT AND MUTUAL RELEASE and he
understands that it will not become effective and may be revoked until seven (7)
days after it is executed. In order to revoke this SEPARATION AGREEMENT AND
MUTUAL RELEASE, Employee must deliver to USHO's Chairman, Jay C. Huffard, on or
before seven (7) days after the execution of this SEPARATION AGREEMENT AND
MUTUAL RELEASE, a letter stating that he is revoking this SEPARATION AGREEMENT
AND MUTUAL RELEASE. 


Dated: October 14, 1996                          /s/ G. Robert O'Brien
                                            ------------------------------------
                                                 G. Robert O'Brien



Dated:  October 14, 1996                    U.S. HomeCare Corporation

                                            By:  Jay Huffard
                                               ---------------------------------


                                       5.
<PAGE>   6
                                                                   EXHIBIT 10.32


                     SETTLEMENT AGREEMENT AND MUTUAL RELEASE


              This SETTLEMENT AGREEMENT AND MUTUAL RELEASE of claims is made by
U.S. HomeCare Corporation, its past, present and future partners, parents,
subsidiaries, related entities, predecessors, successors, directors, officers,
agents, employer sponsored employee benefit and welfare benefit plans, trustees
and administrators of such plans, employees, contractors and assigns
(hereinafter "USHO") and Stephen H. Matheson and his predecessors, successors,
agents, heirs and assigns (hereinafter "Employee"). USHO and Employee shall
hereafter collectively be referred to as the "Parties."

                                   WITNESSETH:

              WHEREAS, Stephen H. Matheson has been an employee of USHO pursuant
to an employment agreement, dated January 27, 1995 (the "Employment Agreement");

              WHEREAS, pursuant to the Employment Agreement the Employee is
entitled to a severance package consisting of cash and other benefits; and

              WHEREAS, the Parties wish to sever their relationship and settle
any outstanding severance obligations and any and all disputes which may exist
between them;

              NOW, THEREFORE, for and in consideration of the representations
made, actions and agreements to be undertaken, and payments to be made as set
forth herein, the Parties agree to fully and forever release and discharge each
other, and covenant not to sue or otherwise institute or cause to be instituted,
or maintain any legal or administrative proceedings against each other with
respect to any matter, including but not limited to claims and causes of action
relating to Employee's employment with USHO and/or the termination of his
employment, including, without limitation, any rights set forth in the
Employment Agreement.

              This SETTLEMENT AGREEMENT AND MUTUAL RELEASE is made in
consideration of the following:

              A.  Employee agrees that his employment with USHO will terminate
effective the date hereof (the "Termination Date"). Employee will have no right
to employment with USHO after the date hereof.

              B.  Pursuant to Employee's existing stock option agreements with
USHO, an aggregate of 150,000 shares of USHO's Common Stock are vested and
exercisable by Employee. Pursuant to Section 3.03 of such option agreements, no
<PAGE>   7
additional portion of any such option shall vest, but the vested portion may be
exercised in whole or in part within three (3) months of the date hereof.

              C.  Employee hereby resigns as Chief Administrative Officer of
USHO.

              D.  USHO shall pay Employee (i) $58,500, to be paid $14,625 per
month for four months and (ii) $50,000, to be paid $2,083.33 per month for the
twenty-four months following the time period of section (i) of this Paragraph.
Payments shall be made in arrears every two weeks in accordance with USHO's
standard payroll practices.

              E.  USHO shall grant to Employee on November 15, 1996 a stock
award of 25,000 shares of USHO Common Stock pursuant to the terms of Article III
of the 1995 Stock Option/Stock Issuance Plan.

              F.  Employee will remain eligible to participate in USHO's health
insurance, life insurance and disability insurance programs for three months
from the date hereof (the "Benefit Period") unless and until Employee commences
full-time employment with another employer. Employee understands that his
entitlement to any benefit continuation following the end of the Benefit Period
will be governed by COBRA and will be at Employee's expense. Employee
understands that his vacation accrual will cease effective on the date hereof
and agrees that accrued vacation pay, if any, is satisfied by the payments made
to Employee pursuant to Paragraph D above.

              G.  Employee acknowledges that the payments made hereunder are not
part of an exit incentive or other employment termination program offered to a
group or class of employees.

              H.  Employee and USHO represent that they are not currently
involved, directly or indirectly, in any legal or administrative proceedings
against one another, and have not engaged in any efforts, plans or preparation
to become so involved in the future.

              I.  The Parties understand and agree that they are waiving any
rights that they may have or now have, known or unknown, to pursue 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, known or unknown, against USHO, its
officers, directors, stockholders, corporate affiliates, agents and employees,
including, but not limited to, all claims arising out of his employment
relationship with USHO, all employment discrimination claims under Title VII of
the Civil Rights Act of 1964, 42 U.S.C.


                                       2.
<PAGE>   8
Section 2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C.
Section 621 et seq., and the Connecticut General Statutes, damages arising out
of all employment discrimination claims, wrongful discharge claims or other
common law claims and damages. Nothing in this SETTLEMENT AGREEMENT AND MUTUAL
RELEASE, however, shall be construed as releasing USHO from its obligations
under this SETTLEMENT AGREEMENT AND MUTUAL RELEASE and the exhibits hereto.

              J.  In addition, and in further consideration of the foregoing,
the Parties agree that nothing contained in this SETTLEMENT AGREEMENT AND MUTUAL
RELEASE shall constitute or be treated as an admission of liability or
wrongdoing by USHO or Employee.

              K.  This SETTLEMENT AGREEMENT AND MUTUAL RELEASE is deemed to have
been entered into in the State of Connecticut and shall be construed and
interpreted in accordance with the laws of that state.

              L.  In addition, and in further consideration of the foregoing,
this release extends to claims which the Parties do not know or suspect to exist
in their favor at the time of executing the mutual release, which if known by
them must have materially affected this settlement.

              M.  The Parties agree that they will not, without compulsion of
legal process, disclose to others the terms or amounts referred to in this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE or the fact of the payment of said
amounts, except that they may disclose them to their attorneys, accountants or
other professional advisors to whom the disclosure is necessary to effect the
purposes for which they have consulted such professional advisors. The Parties
further agree that they will not defame or disparage each other.

              N.  The Parties understand that the covenants contained in this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE, including the covenants of
nondisclosure, non-defamation and non-disparagement, are material inducements
for the making of this agreement and that, in the event of a material breach
hereof, the other party will be entitled to pursue its legal and equitable
remedies, including without limitation, the right to recover damages and seek
injunctive relief. The prevailing party in any such action shall be entitled to
recover its costs and reasonable attorneys' fees. Furthermore, in the event that
Employee files or commences any legal action or administrative proceeding
against USHO, USHO shall, in addition to any available legal and equitable
remedies, not be obligated to make any future payments of any amounts which
would otherwise be due under Paragraph D.

              O.  The Parties acknowledge and agree that no promises or repre-
sentations were made which do not appear written in this Agreement and that this


                                       3.
<PAGE>   9
SETTLEMENT AGREEMENT AND MUTUAL RELEASE, contains the entire agreement of the
Parties as to the subject matter hereof. This SETTLEMENT AGREEMENT AND MUTUAL
RELEASE shall be construed to be fully enforceable. If for any reason any part
of this SETTLEMENT AGREEMENT AND MUTUAL RELEASE is determined to be void or
unenforceable, the agreement and/or any remaining part hereof shall be construed
without reference to such void or inapplicable provisions to be an enforceable
SETTLEMENT AGREEMENT AND MUTUAL RELEASE between the Parties.

              P. The Parties acknowledge that they have read and understand the
foregoing SETTLEMENT AGREEMENT AND MUTUAL RELEASE and that they sign it
voluntarily and without coercion. They further acknowledge that they have been
advised by and been given the opportunity to consult with an attorney of their
own choosing concerning the waivers contained in this SETTLEMENT AGREEMENT AND
MUTUAL RELEASE and that the waivers made herein are knowing, conscious and with
full appreciation that such party is forever foreclosed from pursuing any of the
rights so waived. Employee further acknowledges that he has twenty-one (21) days
after receipt of this SETTLEMENT AGREEMENT AND MUTUAL RELEASE to consider this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE and he understands that it will not
become effective and may be revoked until seven (7) days after it is executed.
In order to revoke this SEPARATION AGREEMENT AND MUTUAL RELEASE, Employee must
deliver to USHO's Chairman, Jay C. Huffard, on or before seven (7) days after
the execution of this SEPARATION AGREEMENT AND MUTUAL RELEASE, a letter stating
that he is revoking this SEPARATION AGREEMENT AND MUTUAL RELEASE.


Dated: October 14, 1996                          /s/ Stephen Matheson
                                            ------------------------------------
                                                 Stephen H. Matheson



Dated: October 14, 1996                     U.S. HomeCare Corporation

                                            By: /s/ Jay Huffard
                                                --------------------------------



                                       4.