<PAGE>
 
                                                                    EXHIBIT 10.2


October 9, 1997


Dear Mr. Murchison:

This letter will confirm that the DTM Board of Directors has approved the
payment of severance on the termination of your employment from DTM Corporation
on the following terms and conditions. 

The compensation and benefits that will be paid to you pursuant to this letter
are in lieu of any benefits you would otherwise receive under any separation
plan, policy, or practice of the Company, and are provided to you as
consideration for your execution of the attached Release prior to the payment of
such benefits. Inasmuch as the compensation and benefits provided herein are
greater than those to which you would otherwise be entitled, your acceptance of
the arrangements outlined in this letter shall constitute a waiver of any other
rights that you may have under any separation plan, policy, or practice of the
Company.

1.   DATE OF RESIGNATION
     -------------------

     Your last day of active employment would be established at the time of
     termination, and is referred to as your "Severance Date" later in this
     letter, and in the attached Release. Up through that date, you will remain
     an active employee of the Company and will be eligible to participate in
     and receive all compensation and benefits to which you are currently
     entitled. Thereafter, you will have no status as an employee of the
     Company.


2.   SEPARATION PAYMENTS
     -------------------

     If your employment is terminated at the request of the Company, for
     reasons other than fraud, unethical conduct, or intentional misconduct on
     your part, your base salary as of the Severance Date will be continued
     through the end on the month in which the first anniversary of the
     Severance Date occurs. Payments will be made to you in the same amounts and
     at the same time as your base salary payments were made to you when you
     were an active employee of the Company. These payments shall be considered
     separation payments, and not consideration for any services rendered. You
     will not be required or expected to perform any additional services for the
     Company to receive these separation payments, but you must fulfill your
     obligations under this letter and the attached Release.

                                       1
<PAGE>
 
3.   MEDICAL, DENTAL AND LIFE INSURANCE BENEFITS. 
     -------------------------------------------

     To and including your Severance Date, you will be entitled to continue to
     receive medical, dental, and life insurance benefits from the Company, at
     the same rates as those paid by active employees for such coverage.
     Thereafter, you will be entitled to exercise any rights to extend coverage
     by paying the premium as required under applicable law. You will be advised
     of this opportunity separately by our Human Resources administrator.

4.   EQUITY APPRECIATION PLAN
     ------------------------

     Pursuant to the terms of the DTM Equity Appreciation Plan, the stock
     options granted to you under this Plan will become null and void if they
     are not exercised by the deadlines imposed by the plan.

5.   VACATION
     --------

     The Company agrees to pay, with the first separation payment made to you,
     an amount representing any earned but untaken vacation hours accrued
     through the Severance Date, as determined from the appropriate records
     maintained by the Company, in accordance with Company policy.

6.   UNREIMBURSED EXPENSES
     ---------------------

     The Company agrees to pay your unreimbursed expenses, if any, incurred on
     behalf of the Company, upon submission by you of a properly supported
     expense report by not later than ten business days following your Severance
     Date. You agree to fully satisfy any outstanding debts to the Company and
     to pay in full the outstanding balance on your Corporate American Express
     account as promptly as possible, but in any event no later than fifteen
     business days following your Severance Date.

7.   COMPANY PROPERTY
     ----------------

     You must return all Company property in your possession, including, without
     limitation, the brochures, manual, supplies paid for by DTM, and computer
     system used by you in your employment at the Company, (the hardware and the
     software should remain loaded on the system, and any monitor and docking
     station, printer, and laptop each shall be included in the returned
     equipment). Company property must be returned no later than five business
     days following your Severance Date. Failure to do so will be considered
     theft and may be prosecuted.

8.   CONFIDENTIALITY, NON-DISCLOSURE AND NON-COMPETE PROVISIONS
     ----------------------------------------------------------

                                       2
<PAGE>
 
     In addition to the duties of non-disclosure set forth in the letter
     agreement dated ______________ between you and the Company (the "Original
     Agreement"), you agree not to disclose any trade secrets known to you and
     owned by the Company, said trade secrets including but not limited to the
     identity of any current customer or potential customer of the Company whose
     identity has become known to you during your employment with the Company,
     and Company proprietary information regarding technology, marketing 
     methodologies, corporate opportunities, and acquisition prospects.

     In addition to the duties to return property to the Company set forth in
     the Original Agreement, you agree to return all assets and recorded
     expressions of any information owned by or relating to the Company, said
     information including but not limited to trade secrets, ideas, concepts,
     improvements, discoveries, inventions, and materials relating to new types
     of products or services. You further agree that said return of assets will
     be effected immediately, or within a reasonable time of not more than one
     calendar week after the date of your termination, by submitting said assets
     to either your direct supervisor or the Controller of the Company.

     For a period ending one year after your Severance Date, you agree, unless
     specifically requested by the Company, not to communicate directly or
     indirectly with, or cause communications with, any current customer, or any
     potential customer of the Company whose identity has become known to you
     during your employment with the Company, where such communication relates
     to the Company, rapid prototyping, or constructing three dimensional parts.

     For a period ending one year after your Severance Date, you agree that you
     will not, acting alone or in conjunction with others, directly or
     indirectly, became employed by, perform service for, or otherwise engage in
     any competing business which derives revenue from, or manufactures, uses,
     or sells, apparatus for rapid prototyping, rapid tooling or constructing
     three dimensional parts, whether for your own account or by soliciting,
     canvassing or accepting any transaction from any business. Such competing
     businesses include, but are not limited to, the following: (1) 3D Systems,
     Inc.; (2) Helisys, Inc.; (3) Stratasys, Inc.; (4) Cubital, Inc.; (5)
     Sanders; and (6) EOS.

     You agree that at no time in the future will you make any statements of any
     kind to any third party about the Company or any aspect of its business, or
     any of its officers, directors, employees, or others associated in any way
     with the Company, which are or could reasonably be regarded as disparaging,
     derogatory, defamatory, or otherwise negative. You agree that you will not
     disclose to any third party the provisions of this letter agreement.

                                       3
<PAGE>
 
     For purposes of this Section 8, "Company" shall include the Company, and
     its successors, assigns, divisions, parents, related or affiliated
     companies, including The B.F. Goodrich Company, and the officers,
     directors, shareholders, employees, agents and counsel of both the Company
     and all related and affiliated companies, including The B.F. Goodrich
     Company, including, without limitation, all management and supervisory
     employees. The terms and agreements set forth in this Paragraph 8 shall,
     except as stated otherwise, survive the completion of the obligations
     contained in this letter agreement.

9.   REFERENCES
     ----------

     The Company will provide to any third parties information about your dates
     of employment and your compensation level, but will provide no information
     about your performance.

10.  ASSISTANCE TO THE COMPANY
     -------------------------

     You agree to be available after your resignation to answer questions and
     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 pay as of the Severance Date, for the days you provide such service.

11.  WITHHOLDING TAXES
     -----------------

     All payments made to you under this letter agreement will be subject to any
     applicable federal, state and local tax withholding requirements.

12.  RELEASE
     -------

     The Company's obligation to provide the foregoing termination payments and
     benefits to you are subject to receipt from you of a Release in the form
     attached, in accordance with the time frames referenced in such Release.
     The Company reserves the right to defer making any payment hereunder until
     the signed Release has been delivered and such time frames have expired.

This letter sets forth our full understanding regarding the compensation and
benefits that will be available to you following your severance of employment
with the Company. If you

                                       4
<PAGE>
 
agree to the foregoing, please sign both copies of the agreement and the
attached Release and return one of each to me. This agreement will become
effective only if it and the Release are executed by you and returned to me on
or prior to October ___, 1997. If you do not do so, the Company's offer to
provide the compensation and benefits described in this letter agreement shall
be deemed automatically withdrawn. Further, if this letter agreement becomes
effective, and you breach any of its terms and conditions, the Company shall
have the right to terminate any remaining payments to you hereunder, and to
recover any amounts previously paid under this letter agreement, as well as any
additional damages arising as a result of your breach.

                                Very truly yours,

                                DTM Corporation


                                By: 
                                   --------------------------------------------
                                       D. Lee Tobler
                                       Chairman of the Board
Accepted and Agreed by:

By signing below I certify that I have read each provision of the foregoing
letter agreement, as well as the attached Release; that I understand their
meaning and consequences; that I have had appropriate time to consult advisors
and consider signing; and that I am signing of my own free will, without
pressure from the Company, or duress.



----------------------------------
John S. Murchison, III 


----------------------------------
Date

                                       5
<PAGE>
 
                                    RELEASE
                                    -------

This Release is given in exchange for my receipt of the enhanced severance
benefits which are being offered to me, pursuant to the terms of a letter
agreement provided to me by DTM Corporation (the "Company") dated October __,
1997 to which this Release is attached. I acknowledge having received this
letter agreement and having had a sufficient opportunity to review and consider
it and to meet with a Human Resources representative of the Company to discuss
its contents, and I agree that in exchange for the benefits described therein, I
will be bound by the conditions set forth in that letter. I further acknowledge
that the benefits of the enhanced severance benefits represent substantial
consideration over and above those to which I would otherwise be entitled under
any plan, program or practice for severance or termination benefits provided or
maintained by the Company at any time.

I hereby release and discharge the Company from any and all liabilities, claims,
causes of action, demands, and damages of any kind, whether known or unknown,
arising out of or related in any way to any aspect of my employment, including
the termination of my employment. This release includes, but is not limited to,
any claim of discrimination on any basis, including race, color, national
origin, religion, sex, disability, or age, arising under any federal, state, or
local statute, ordinance, order or law, including the Age Discrimination in
Employment Act. The release also includes, but is not limited to, any claim that
the Company breached any contract or promise, express or implied, made to me
concerning my employment, or any term or condition of my employment, and any
claim of tortious conduct by the Company with respect to any aspect of my
employment, including the termination of my employment.

Notwithstanding anything contained in this Release to the contrary, this Release
shall not be construed as a waiver of my rights to any vested benefits under the
terms of any tax-qualified retirement plans of the Company in which I have been
a participant during my employment. I acknowledge, however, that the enhanced
severance benefits are being provided to me in lieu of, and not in addition to,
the benefits of any severance or termination plan, program, or practice of the
Company.

I further agree that this Release shall also be binding on my spouse, dependent
children, heirs, successors, assigns and legal representatives, and that the
Release shall release the Company, and its successors, assigns, divisions,
parents, related or affiliated companies, officers, directors, plan trustees,
shareholders, employees, agents and counsel, including, without limitation, all
management and supervisory employees. (The term "Company", whenever used in the
Release, shall refer to all such persons and entities.) If any provision of this
Release is declared invalid or unenforceable, the remaining portions of the
Release shall not be affected thereby, and shall be enforced.

                                       6
<PAGE>
 
I, THE UNDERSIGNED EMPLOYEE, HAVE READ AND FULLY UNDERSTAND THE CONTENTS OF THIS
RELEASE. I ACKNOWLEDGE THAT I HAVE BEEN GIVEN AT LEAST 7 DAYS TO CONSIDER THE
RELEASE, TO DISCUSS IT WITH A HUMAN RESOURCES REPRESENTATIVE OF THE COMPANY, AND
TO CONSULT WITH PROFESSIONAL ADVISERS, INCLUDING AN ATTORNEY OF MY CHOOSING
REGARDING IT.

I FURTHER UNDERSTAND THAT I HAVE A PERIOD OF SEVEN DAYS, BEGINNING ON THE DAY I
SIGN THIS RELEASE, DURING WHICH I MAY REVOKE MY ACCEPTANCE OF THE RELEASE. THIS
RELEASE WILL NOT BECOME EFFECTIVE UNTIL SEVEN DAYS AFTER I HAVE SIGNED IT.

I have signed this Release on this _____ day of ____________, 199_.





                                        ____________________________________
                                               Employee Name

                                       7