<PAGE>

                                                                    EXHIBIT 10.1


                         [DTM Corporation Letterhead]

                                March 30, 2001


John S. Murchison, III
5603 Oakwood Cove, #201
Austin, TX 78731

Dear John:


          The purpose of this letter agreement is to document the terms of the
benefit package to which you will be entitled should DTM Corporation (the
"Company") terminate your employment (other than a Termination for Cause) and/or
should there occur certain changes in control of the Company.  This letter
agreement supercedes that certain severance agreement between you and the
Company dated October 9, 1997 (the "Severance Agreement").

          Part One of this letter agreement specifies the terms and conditions
of your severance benefits upon your termination by the Company (other than a
Termination for Cause).  Part Two sets forth the terms and conditions of any
Change in Control benefits to which you may be entitled.  Part Three sets forth
certain definitional provisions to be in effect for purposes of determining your
benefit entitlements.  Part Four outlines your continuing confidentiality and
non-compete obligations to the Company and penalties for breach of those
obligations.  Part Five concludes this agreement with a series of general terms
and conditions applicable to your benefits.

                         PART ONE - SEVERANCE BENEFITS

          If your employment is terminated at the request of the Company, for
reasons other than a Termination for Cause, you will receive salary continuation
at your salary rate then in effect (the "Severance Payments") for a period
beginning on your termination date and continuing through the end of the month
in which the first anniversary of your termination date occurs (the "Severance
Period").  The Severance Payments will be paid to you in equal installments at
semi-monthly intervals over the Severance Period.  All payments under this Part
One will be subject to the Company's collection of applicable withholding taxes.
The Severance Payments are in lieu of any severance or other benefits you would
otherwise receive under any separation plan, policy or practice of the Company.
You will not be required or expected to perform any additional services for the
Company to receive these Severance Payments, but you must comply with the terms
of this letter agreement, including execution of the attached Release and
Waiver.

          Upon a Change in Control, you will not be entitled to the Severance
Payments set forth in this Part One.  Upon a Change in Control, any severance or
other benefits will be governed by Part Two of this letter agreement.
<PAGE>

John S. Murchison, III                                            March 30, 2001
                                                                          Page 2


                    PART TWO -- CHANGE IN CONTROL BENEFITS

          Upon a Change in Control effected during the term of this letter
agreement, you will become entitled to receive the special benefits set forth
below.

          1.   Special Payment. You will receive payments from the Company for a
period of eighteen (18) months following a Change in Control in an aggregate
amount equal to the sum of (A) one and one-half (1.5) times the annual rate of
base salary in effect for you at the time of such Change in Control plus (B)
three-fourths (.75) of the maximum bonus payable to you under the Management
Incentive Plan currently in effect at the time of the Change in Control (the
"Special Payments"). These Special Payments will be paid to you in equal
installments at semi-monthly intervals over the eighteen (18) month period
following such Change in Control. All payments under this Paragraph 1 will be
subject to the Company's collection of applicable withholding taxes.

          2.   Health Care Coverage.  In the event of your Involuntary
Termination within twelve (12) months following a Change in Control, the Company
will provide continued health care coverage in an amount equivalent to what you
would have been entitled to had you remained in your current position with the
Company under the Company's medical/dental insurance plan pursuant to your
rights under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") until the earlier of (i) eighteen (18) months after the date of such
                    -------
termination or (ii) the date you are no longer eligible for COBRA (the "Benefit
Continuation").  Nothing in this paragraph is intended to preclude the Company
from amending or terminating any health benefit plans provided to active
employees or former employees, including yourself, at any time following the
execution of this agreement.  At the end of the Benefit Continuation period, you
will be entitled to continued health care coverage pursuant to COBRA at your own
expense to the extent permitted by law

          3.   Benefit Reduction.  Should any of your benefits under this letter
agreement (when aggregated with other such benefits) be deemed to be parachute
payments under Code Section 280G ("Parachute Payments"), then the dollar amount
of your payments and health care benefits under Paragraphs 1 and 2 of this Part
Two will be reduced to the extent (and only to the extent) necessary to provide
you with the maximum after-tax benefit available, after taking into account any
parachute excise tax which might otherwise be payable by you under Code Section
4999 and any analogous State income tax provision.

                           PART THREE -- DEFINITIONS

          Definitions.  For purposes of this letter agreement, the following
          -----------
definitions will be in effect:

          Board means the Company's Board of Directors.
<PAGE>

John S. Murchison, III                                            March 30, 2001
                                                                          Page 3

         Change in Control means any of the following events:

               (i)   a merger, consolidation or reorganization approved by the
     Company's shareholders, unless securities representing more than fifty
     percent (50%) of the total combined voting power of the voting securities
     of the successor corporation are immediately thereafter beneficially owned,
     directly or indirectly and in substantially the same proportion, by the
     persons who beneficially owned the Company's outstanding voting securities
     immediately prior to such transaction;

               (ii)  any shareholder-approved transfer or other disposition of
     all or substantially all of the Company's assets;

               (iii) the acquisition, directly or indirectly, by any person or
     related group of persons (other than the Company or a person that directly
     or indirectly controls, is controlled by, or is under common control with,
     the Company), of beneficial ownership (within the meaning of Rule 13d-3 of
     the 1934 Act) of securities possessing more than fifty percent (50%) of the
     total combined voting power of the Company's outstanding securities
     pursuant to a tender or exchange offer made directly to the Company's
     shareholders; or

               (iv)  a change in the composition of the Board over a period of
     thirty-six (36) consecutive months or less such that a majority of the
     Board members ceases, by reason of one or more contested elections for
     Board membership, to be comprised of individuals who either (A) have been
     Board members continuously since the beginning of such period or (B) have
     been elected or nominated for election as Board members during such period
     by at least a majority of the Board members described in clause (A) who
     were still in office at the time the Board approved such election or
     nomination;

provided that such event does not involve any group of persons with whom you are
-------- ----
affiliated or in which you have an interest other than ownership of less than 1%
of a class of securities of a publicly traded corporation which you owned prior
to the commencement of the discussions and transactions which result in such
change in control.

          Code means the Internal Revenue Code of 1986, as amended.

          Common Stock means the Company's common stock.

          Health Care Coverage means the continued medical/dental, vision and
disability insurance coverage to which you and your eligible dependents may
become entitled under this agreement upon a Change in Control, unless the
termination of your employment is a Termination for Cause.

          Involuntary Termination means the termination of your service with the
Company which occurs by reason of:
<PAGE>

John S. Murchison, III                                            March 30, 2001
                                                                          Page 4

               (i)   your involuntary dismissal or discharge by the Company
(other than a Termination for Cause), or

               (ii)  your voluntary resignation following (A) a change in your
position with the Company or Parent or Subsidiary employing you which materially
reduces your duties and responsibilities, (B) a reduction in your level of
compensation (including base salary, fringe benefits and target bonus under any
performance based bonus or incentive programs) by more than fifteen percent
(15%) or (C) a relocation of your place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is effected by
the Company without your consent.

          1934 Act means the Securities Exchange Act of 1934, as amended.

          Option means any option granted to you under the Company's 1999 Stock
Incentive Plan, 1998 Stock Option Plan, 1996 Stock Option Plan or any other
equity incentive plan subsequently adopted by the Company or any successor which
is outstanding at the time of the Change in Control.

          Stock Issuance means the issuance of unvested shares of Common Stock
under the Company's 1999 Stock Incentive Plan, the 1998 Stock Option Plan, the
1996 Stock Option Plan or any other equity incentive plan subsequently adopted
by the Company or any successor.

          Termination for Cause means a termination of your employment with the
Company by reason of your commission of any act of fraud, embezzlement or
dishonesty, or your unauthorized use or disclosure of confidential information
or trade secrets of the Company or its subsidiaries or your material failure to
perform your duties as specified by the Board of Directors of the Company.

                     PART FOUR -- CONTINUING OBLIGATIONS

          1.   Continuing Obligations.  In exchange for the consideration set
forth in this letter agreement, including, but not limited to the Severance
Payments set forth in Part One and the Special Payments and Benefit Continuation
set forth in Part Two, you agree that the provisions contained in that certain
DTM Corporation Confidentiality and Non-Disclosure Agreement executed by you on
October 10, 1996 (the "Confidentiality Agreement"), including, but not limited
to your agreement not to disclose Information (as defined in the Confidentiality
Agreement) of the Company and your agreement not to compete with the Company for
a period of two (2) years, are enforceable and continue in full force and
effect.  The Confidentiality Agreement is incorporated herein and is attached as
Exhibit B.
---------

          2.   Company Property.  In addition to your continuing obligation
under the Confidentiality Agreement to return all documents embodying any of the
Company's Information immediately following termination of your employment or
upon request, you agree that within five (5) days following the termination of
your employment, or upon request you shall return all Company property (whether
or not such property contains Information) in your possession, including,
without limitation, brochures, manuals, supplies paid for by the Company,
<PAGE>

John S. Murchison, III                                            March 30, 2001
                                                                          Page 5

computer systems (the hardware and the software loaded on the system, any
monitors and docking stations, printers, and laptop are included).

          3.   Cessation of Benefits.  In the event the Company, upon reasonable
belief, determines that you have breached (i) any provision of the
Confidentiality Agreement, including but not limited to, your agreement not to
disclose Information and your agreement not to compete with the Company for a
period of two (2) years, or (ii) Paragraph 2 of Part Four of this letter
agreement, the Company's obligation to provide you the Severance Payments set
forth in Part One, and/or the Special Payments and Benefit Continuation set
forth in Part Two shall immediately cease.

                     PART FIVE -- MISCELLANEOUS PROVISIONS

          1.   Termination for Cause.  Should your termination constitute a
Termination for Cause, then the Company shall only be required to pay you (i)
any unpaid compensation earned for services previously rendered through the date
of such termination and (ii) any accrued but unpaid vacation benefits, and no
benefits will be payable to you under Part One or Part Two of this letter
agreement.

          2.   Release.  Upon termination of your employment, your right to
receive the Severance Payments in Part One, and/or the Special Payments and
Benefit Continuation and other benefits in Part Two is conditioned on your
execution and delivery of a Release and Waiver in substantially the form of
attached Exhibit A.
         ---------

          3.   Options and Stock Issuances.  In the event of your termination or
a Change in Control, the terms of your Options and Stock Issuances will continue
to be governed by the notice of grant of stock option, stock option agreement,
stock issuance agreement and any other agreement entered into by you and the
Company at the time of, and with respect to, such Option grants or Stock
Issuances; nothing in this agreement shall be construed to alter or affect the
terms of your Options or Stock Issuances.

          4.   General Creditor Status.  The benefits to which you may become
entitled under this letter agreement will be paid, when due, from the general
assets of the Company.  Your right (or the right of the executors or
administrators of your estate) to receive any such payments will at all times be
that of a general creditor of the Company and will have no priority over the
claims of other general creditors of the Company.

          5.   Death.  Should you die before receipt of all benefits to which
you become entitled under this letter agreement, then the payment of such
benefits will be made, on the due date or dates hereunder had you survived, to
the executors or administrators of your estate. Should you die before you
exercise your Options, then each such Option may be exercised, during the
applicable exercise period in effect hereunder for those Options at the time of
your death, by the executors or administrators of your estate or by person to
whom the Option is transferred pursuant to your will or in accordance with the
laws of inheritance.
<PAGE>

John S. Murchison, III                                            March 30, 2001
                                                                          Page 6

          6.   Confidentiality.  The terms and existence of this letter
agreement are strictly confidential and may not be disclosed to any other person
or entity, with the exception of your immediate family members and legal and
financial advisors.

          7.   Assistance to the Company.  You agree to be available after your
termination of employment with the Company to assist in locating files, data or
information regarding the work you have been doing for the Company, upon
reasonable request by the Company.  You also agree to make yourself available
upon request by the Company to assist the Company in the transaction of any
active matters on which you are currently working and the prosecution or defense
of any litigation involving the Company concerning any matter of which you have
knowledge as a result of your position within the Company.  You will be
reimbursed for travel and will receive a per diem equivalent to the daily rate
of your base salary that was in effect as of the date of your termination for
the days you provide such service.

          8.   Miscellaneous.  This letter agreement will be binding upon you,
the Company, its successors and assigns (including, without limitation the
surviving entity in any Change in Control) and is to be construed and
interpreted under the laws of the State of Texas. You and the Company hereby
irrevocably agree that the exclusive forum for any suit, action, or other
proceeding arising out of or in any way related to this agreement shall be in
the state or federal courts in Texas, and you and the Company agree to the
exclusive personal jurisdiction and venue of any court in Travis County, Texas.
This agreement incorporates the entire agreement between you and the Company
relating to the subject of severance benefits and supersedes all prior
agreements and understandings with respect to such subject matter, except for
the Confidentiality Agreement, which is incorporated herein.  This agreement may
only be amended by written instrument signed by you and another duly authorized
officer of the Company.  If any provision of this letter agreement as applied to
any party or to any circumstance should be adjudged by a court of competent
jurisdiction to be void or unenforceable for any reason, the invalidity of that
provision shall in no way affect (to the maximum extent permissible by law) the
application of such provision under circumstances different from those
adjudicated by the court, the application of any other provision of this letter
agreement, or the enforceability or invalidity of this letter agreement as a
whole.  Should any provision of this letter agreement become or be deemed
invalid, illegal or unenforceable in any jurisdiction by reason of the scope,
extent or duration of its coverage, then such provision shall be deemed amended
to the extent necessary to conform to applicable law so as to be valid and
enforceable or, if such provision cannot be so amended without materially
altering the intention of the parties, then such provision shall be stricken and
the remainder of this letter agreement shall continue in full force and effect.

          9.   Remedies.  All rights and remedies provided pursuant to this
letter agreement or by law will be cumulative, and no such right or remedy will
be exclusive of any other.  A party may pursue any one or more rights or
remedies hereunder or may seek damages or specific performance in the event of
another party's breach hereunder or may pursue any other remedy by law or
equity, whether or not stated in this letter agreement.

          10.  Legal and Equitable Remedies.  Because your services are personal
and unique and because you will have access to and become acquainted with the
Information (as
<PAGE>

John S. Murchison, III                                            March 30, 2001
                                                                          Page 7


defined in the Confidentiality Agreement) of the Company, the Company shall have
the right to enforce this letter agreement and the Confidentiality Agreement, by
injunction, specific performance, or other equitable relief, without bond and
without prejudice to any other rights and remedies that the Company may have for
a breach of this letter agreement.

          11.  No Employment or Service Contract.  Nothing in this agreement
shall confer upon you any right to continue in the employment of the Company for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Company or you, which rights are hereby expressly reserved
by each, to terminate your employment at any time for any reason whatsoever,
with or without cause.

          12.   Recovery of Attorney's Fees.  In the event of any litigation
arising from or relating to this agreement, the prevailing party in such
litigation proceedings shall be entitled to recover, from the non-prevailing
party, the prevailing party's costs and reasonable attorney's fees, in addition
to all other legal or equitable remedies to which it may otherwise be entitled.

                           [Signature page follows]
<PAGE>

John S. Murchison, III                                            March 30, 2001
                                                                          Page 8


          Please indicate your acceptance of the foregoing provisions of this
letter agreement by signing the enclosed copy of this letter agreement and
returning it to the Company.



                                   DTM CORPORATION


                                   By: /s/ Geoffrey W. Kreiger
                                       -----------------------------------------
                                   Name:   Geoffrey W. Kreiger
                                   Title:  Chief Financial Officer and Secretary


ACCEPTED AND AGREED TO:


Signature: /s/ John S. Murchison, III
           --------------------------------
                John S. Murchison, III

Dated: March 30, 2001
<PAGE>

                                   EXHIBIT A
                                   ---------

                         RELEASE AND WAIVER OF CLAIMS
                         ----------------------------

          In consideration of the payments and other benefits to which I have
become entitled, pursuant to that certain letter agreement between DTM
Corporation, a Texas corporation (the "Company"), and me dated March 30, 2001
(the "Letter Agreement"), in connection with the termination of my employment on
this date, I, John Murchison, hereby furnish the Company with this release and
waiver of claims (the "Release and Waiver").

          By signing this Release and Waiver, I acknowledge and agree that
absent this Release and Waiver, I have no legal entitlement to the consideration
provided in the Letter Agreement and that the consideration given to me
represents good and sufficient value for the releases and other agreements by me
set forth in this Release and Waiver.

                                   Agreement
                                   ---------

          By signing this Release and Waiver and accepting the severance as
outlined in the Letter Agreement, I agree to waive, release, and forever
discharge the Company and its parents, successors, assigns, divisions,
subsidiaries, affiliates, partners, officers, directors, executives, investors,
shareholders, managers, supervisors, employees, agents, attorneys and
representatives (the "Released Parties" or "Releasees"), from any and all
claims, demands, and causes of action which I have or claim to have, whether
known or unknown, of whatever nature, which exists or may exist as of the date
of my execution of this Release and Waiver.  "Claims," "demands," and "causes of
action" include, but are not limited to, claims based on contract, fraud,
equity, tort, discrimination, harassment, retaliation, personal injury,
constructive discharge, emotional distress, public policy, wage, and hour law,
defamation, claims for debts, accounts, attorneys' fees, compensatory damages,
punitive damages, and/or liquidated damages, claims for vesting or accelerated
vesting of options to purchase the Company's Common Stock, and any and all
claims arising under the Americans with Disabilities Act, the Family and Medical
Leave Act, or any other federal or state statute governing employment, including
but not limited to Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Texas Labor Code, and the Texas Commission
on Human Rights Act, as such statutes may have been or may be amended from time
to time.

          Without in any way limiting the generality of the above paragraph, by
signing this Release and Waiver and accepting the severance outlined above, I
specifically agree to release all claims, rights, or benefits I may have for age
discrimination arising out of or under the Age Discrimination in Employment Act
of 1967, 29 U.S.C. (S) 621 ("ADEA"), et seq. as the ADEA may have been or may be
amended, or any equivalent or comparable provision of state or local law,
including, without limitation, the Texas Commission on Human Rights Act.

          I represent and warrant that I do not presently have on file, and
agree that I will not hereafter file, any claims, charges, grievances or
complaints against the Company and/or the Released Parties in or with any
administrative, state, federal or governmental entity, agency, board or court,
or before any other tribunal or panel or arbitrators, public or private, based
upon
<PAGE>

any actions or omissions by the Company and/or the Released Parties occurring
prior to the date of my execution of this Release and Waiver, with the exception
of claims brought by me to challenge the validity of this Release and Waiver
under the Age Discrimination in Employment Act or the Older Workers Benefit
Protection Act.

          Finally, I represent and agree that I am the sole and lawful owner of
all rights, title and interest in and to all released matters, claims and
demands arising out of or in any way related to my employment with the Company
and/or the termination thereof.

                       Acceptance of Release and Waiver
                       --------------------------------

          I have twenty-one (21) days to consider this Release and Waiver, and
offer of severance contained in the Letter Agreement, and I may revoke this
Release and Waiver at any time during the first seven (7) days following my
execution of this Release and Waiver by delivering written notice of revocation
to the Company's Board of Directors, no later than five (5:00) p.m. on the
seventh (7th) day after execution.  I received this Release and Waiver on ___
__, 2001.  The settlement offer contained in the Letter Agreement will
automatically expire if this Release and Waiver, fully executed by me, is not
received by Company's Board of Directors, on or before [Insert Date 21 days
after date received].

          This Release and Waiver will become effective, irrevocable and fully
enforceable upon the expiration of seven (7) days following the date of my
execution of this Release and Waiver (the "Effective Date"), provided that I
have timely executed this Release and Waiver and I have not exercised my right
to revoke this Release and Waiver.

                             Other important terms
                             ---------------------

     .    Nothing in this Release and Waiver shall constitute or be treated as
          an admission of any wrongdoing or liability on the part of the Company
          and/or the Released Parties.

     .    I have been advised to consult with an attorney of my choosing prior
          to entering into this Release and Waiver.

     .    The Company will provide third parties with references detailing the
          dates of my employment and positions held, but will provide no further
          information, including information regarding performance, without my
          express written consent.

     .    I understand and agree that in any dispute between me and the Company
          regarding the terms of this Release and Waiver and/or any alleged
          breach thereof, that the prevailing party shall be entitled to recover
          its costs and reasonable attorneys' fees arising out of such dispute,
          except that the Company shall not, by virtue of this Release and
          Waiver, be entitled to recover its costs or attorney's fees resulting
          from challenges to the validity of this Release and Waiver by me under
          the Age Discrimination in Employment Act or the Older Workers Benefit
          Protection Act. Nothing in this Release and Waiver is intended to
          preclude the
<PAGE>

          Company from recovering attorney's fees or costs specifically
          authorized under federal law.

     .    This Release and Waiver is binding on my representatives, heirs,
          executors, administrators, successors and assigns.

     .    I am personally responsible for the payment of all federal, state and
          local taxes that are due, or may be due, for any payments and other
          consideration received by me under the Letter Agreement. I agree to
          indemnify the Company and hold the Company harmless, from any and all
          taxes, penalties and/or other assessments that the Company is, or may
          become, obligated to pay on account of any payments and other
          consideration made to me under the Letter Agreement and this Release
          and Waiver.

     .    The terms and existence of this Release and Waiver are strictly
          confidential and may not be disclosed to any other person or entity,
          with the exception of my immediate family members and legal and
          financial advisors.

     .    I agree not to disparage or in any way criticize the Company and/or
          its officers, managers, supervisors, employees, investors, products,
          services, or technology at any time in the future. Nothing contained
          in this Paragraph is intended to prevent me from testifying truthfully
          in any legal proceeding.

     .    This Release and Waiver, and any agreements or documents referred to
          herein, including but not limited to, the Letter Agreement, constitute
          an integrated, written contract, expressing the entire agreement
          between the Company and me with respect to the subject matter hereof.
          In this regard, I represent and warrant that I am not relying on any
          promises or representations that do not appear in this Release and
          Waiver. This Release and Waiver can be amended or modified only by a
          written agreement, signed by me and the Company.

     .    This Release and Waiver shall, in all respects, be interpreted,
          enforced and governed under the laws of the State of Texas applicable
          to contracts executed and performed in Texas without giving effect to
          conflicts of law principles.

     .    With respect to any suit, action, or other proceeding arising from (or
          relating to) this Release and Waiver, the Company and I hereby
          irrevocably agree to the exclusive personal jurisdiction and venue of
          the United States District Court for the Western District of Texas
          (and any Texas State Court within Travis County, Texas).

     .    I agree that if any provision or portion of any provision of this
          Release and Waiver is held to be invalid or unenforceable or to be
          contrary to public policy or any law, for any reason, the remainder of
          the Release and Waiver shall not be affected thereby.
<PAGE>

     .    This Release and Waiver may be executed in separate counterparts and
          by facsimile, and each such counterpart shall be deemed an original
          with the same effect as if the Company and I signed the same document.

                                             DTM Corporation

                                             By:________________________________
                                             Its:_______________________________
John S. Murchison, III                       Date: _____________________________


By:_____________________________
Date:___________________________
<PAGE>

                                   EXHIBIT B
                                   ---------

                 CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT
                 --------------------------------------------