<PAGE>   1
                                                                    EXHIBIT 10.5


                    SETTLEMENT AGREEMENT AND GENERAL RELEASE


         THIS SETTLEMENT AGREEMENT and GENERAL RELEASE (hereinafter "Agreement")
is made and entered into by and between T. BENJAMIN JENNINGS (hereinafter
"Jennings") and METAL MANAGEMENT, INC., a Delaware corporation (hereinafter
"MTLM").

         WHEREAS, the parties have engaged in discussions resulting in an
amicable and mutually satisfactory agreement concerning Jennings' resignation
from his employment and directorships and management committee positions with
MTLM and any and all of its affiliates.

         NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth below, the parties hereby agree as follows:

         1. The Employment Agreement. Jennings and MTLM are parties to an
"Employment Agreement" dated December 15, 1997. Except for Jennings' obligations
pursuant to Paragraphs 15, 18, 19, 23 and 26(a) thereof and MTLM's obligations
pursuant to Paragraphs 24 and 25 thereof, which shall continue, or except as
otherwise expressly provided in this Agreement, this Agreement shall supersede
the terms and provisions of the Employment Agreement, which is terminated
effective immediately and is hereby null and void and without further effect.

         2. Jennings' Resignation. Effective July 15, 1999, Jennings hereby
resigns as Chairman of the Board, Chief Executive Officer and Chief Development
Officer of MTLM, as an officer of MTLM and any and all of its affiliates and as
a director and management committee




<PAGE>   2



member of MTLM and any and all of MTLM's affiliates (including his position on
the Executive Committee of the Board of Directors of MTLM) (July 15, 1999 being
sometimes referred to herein as the "Resignation Date").

         3. The Obligations of MTLM. On and after Jennings' execution of this
Agreement, and in consideration of Jennings' promises as set forth herein, MTLM
shall be obligated to him as set forth herein. Except as expressly set forth in
this Agreement (including in Section 1 above), MTLM shall have no continuing
obligation to Jennings of any kind or nature whatsoever.

         a. Severance Benefits. MTLM shall afford to Jennings all of the
benefits set forth in Paragraph 17 of the Employment Agreement, as if Jennings'
employment had been terminated by MTLM pursuant to Paragraph 14(a) of the
Employment Agreement. Such benefits shall be as set forth in such Paragraph 17
as if such Paragraph 17 were set forth fully herein, except that the lump sum
severance payment specified in Paragraph 17(a) of the Employment Agreement shall
be paid within one (1) business day of Jennings' execution of this Agreement,
and shall be an amount equal to five (5) times the gross earnings specified in
Jennings' 1998 W-2 tax statement, less applicable deductions and withholdings
for federal and state taxes. MTLM shall also pay for Jennings' cell phone
service through July 15, 2000.

         b. Loan. MTLM shall forgive, effective as of January 2, 2000, the
outstanding five hundred thousand dollar ($500,000) loan to Jennings, plus any
accrued interest thereon, which loan is evidenced by a demand note dated July
22, 1998 and which shall not be called due unless Jennings does not
substantially comply with the terms of this Agreement, and at that time shall
release the related pledge agreement, provided that as of such date Mr. Jennings
has substantially




<PAGE>   3



complied with the terms of this Agreement; provided, however, that any failure
or alleged failure by Jennings to comply with his obligations set forth in the
first sentence of Section 4(c) hereof shall not serve as the basis for any claim
by MTLM that such loan need not be forgiven.

         c. Benefit Plans. It is understood and agreed that Jennings' continuous
service under MTLM's 401(k) plan and its other benefit plans shall cease as of
his Resignation Date, except as may be set forth in Paragraph 17 of the
Employment Agreement.

         d. Legal Fees. MTLM agrees to reimburse Jennings in an amount not to
exceed $5,000 for the reasonable fees and disbursements of Jennings' counsel
incurred in connection with the negotiation of this agreement, at such counsel's
customary rates.

         4. The Obligation of Jennings. In consideration of the promises of MTLM
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Jennings agrees as
follows:

                    a. Mutual General Releases. Except for actions which
            constitute or are alleged to constitute fraud or similar wrongdoing
            and any obligations arising under this Agreement, (i) Jennings, for
            himself and for his estate, heirs, personal representatives,
            executors, administrators and assigns, hereby releases and forever
            discharges MTLM, its subsidiaries and related and affiliated
            entities, and each of its and their directors, officers, employees,
            attorneys, agents and representatives (hereinafter collectively and
            individually the "MTLM Releasees"), and (ii) the MTLM Releasees
            hereby release and forever discharge Jennings, his estate, heirs,
            personal representatives, executors, attorneys, successors,
            administrators and assigns, from any and all rights, claims,
            demands, debts, dues, sums of money,




<PAGE>   4



          accounts, attorneys' fees, complaints, judgments, executions, actions
          and causes of action of any nature whatsoever, cognizable at law or
          equity, which either party now has or claims, or might hereafter have
          or claim, against the other party, whether known or unknown, suspected
          or unsuspected, accrued or unaccrued, based upon or arising out of any
          matter or thing whatsoever through the date of this release,
          including, without limitation, any claim, action or cause of action
          which was or is related to or arises out of any acts, omissions,
          representations, facts, events, matters, transactions or occurrences
          during Jennings' employment or directorship with, or his shareholding
          in, MTLM, or his separation and/or resignation therefrom, or which is
          based upon or arises under the Employment Agreement, the Restated
          Stockholders Agreement (as defined below), or any local, state, or
          federal law dealing with employment discrimination, including without
          limitation Title VII of the Civil Rights Act of 1964 and the Americans
          with Disabilities Act.

               b. Stockholders' Agreement. Jennings hereby releases, waives and
          renounces his interest under and pursuant to the Amended and Restated
          Stockholders' Agreement dated February 12, 1999 (the "Restated
          Stockholders Agreement"). Upon the request of MTLM's Board of
          Directors, Jennings will execute such further documents as may be
          necessary to effectuate the foregoing.

               c. Availability. Jennings agrees to cooperate reasonably with
          MTLM in connection with the transition of his responsibilities.
          Jennings also agrees to assist in the transition of pending
          transactions and/or discussions by making




<PAGE>   5



          introductions to the principals of companies with whom discussions
          have begun or with whom the prospect of discussions has been
          discussed. Jennings further agrees to make himself reasonably
          available to MTLM and its attorneys and agents for interview,
          deposition and testimony and agrees to appear as a witness at trial
          and, at the election of MTLM, provide a sworn statement or deposition
          of any matters in which MTLM is a party and/or for which Jennings may
          have knowledge of any relevant facts. In addition, upon the mutual
          agreement of the parties, Jennings will consult with MTLM from time to
          time concerning acquisitions, potential acquisitions or any other
          matter mutually agreed upon by the parties, on such terms, including
          compensation, as shall be mutually agreed between Jennings and the
          Company. MTLM agrees to reimburse Jennings for any reasonable,
          pre-approved out-of-pocket expenses that he incurs in providing such
          assistance and/or consulting, including the cost of travel or lost
          compensation. Jennings agrees not to withhold any information relevant
          to such matters from the Company. Nothing in this Agreement is
          intended to influence any such testimony that Jennings may offer.

               d. MTLM Property. Jennings represents that he has turned over or
          will turn over to MTLM all property of MTLM in his control or
          possession by the Resignation Date, except the property described on
          Schedule A hereto which Jennings shall be entitled to retain as his
          personal possessions. This includes all notes, memoranda, records,
          documents and all other information, no matter how produced or
          reproduced, all computer equipment and programs, all office keys




<PAGE>   6



            and access cards, and all credit and charge cards kept by Jennings
            or in his possession or control used in or pertaining to the
            business of MTLM, it being hereby acknowledged that all of said
            items, and all copies of said items, are the sole and exclusive
            property of MTLM. The obligations set forth herein are in addition
            to the obligations of Jennings pursuant to Paragraph 15 of the
            Employment Agreement.

                    e. Confidentiality of Agreement. Except pursuant to valid
            subpoena issued by a court or government agency of competent
            jurisdiction, Jennings shall not, directly or indirectly, discuss or
            communicate the terms of this Agreement with any third party, except
            members of his immediate family, his accountant and his attorney who
            shall be advised of this confidentiality restriction. Except
            pursuant to a valid subpoena, Jennings will not communicate or
            cooperate with any employee or director or former employee or
            director of MTLM, or with any third party, concerning any claim
            against MTLM.

                    5. Non-Disparagement. Form and after the date of presentment
            of this Agreement, both parties represent that they have not and
            will not, nor will they cause or assist another person to, disparage
            or make critical, negative, derogatory or defamatory statements
            about the other to any third party (including in the case of MTLM,
            its employees), or make any other statement to a third party which
            is intended to or would reasonably have the effect of harming the
            other party to this Agreement. It is understood that Jennings'
            commitment hereunder extends to the Company's officers and
            directors. MTLM agrees to promptly advise its senior officers and
            directors in writing of the foregoing restriction.




<PAGE>   7



               6.  Effective Date. This Agreement shall be effective immediately
          upon its execution by the parties.

               7.  Binding Effect. This Agreement shall be binding upon and
          inure to the benefit of the heirs, assigns, administrators, executors,
          and legal representatives of Jennings and shall be binding upon and
          inure to the benefit of the MTLM Releases.

               8.  Entire Agreement. This instrument constitutes the entire
          Agreement between the parties. It may not be amended or modified
          except by a subsequent written instrument signed by all parties
          hereto.

               9.  Severability. If any provision, section, subsection or other
          portion of this Agreement shall be determined by any court of
          competent jurisdiction to be invalid, illegal or unenforceable in
          whole or in part, and such determination shall become final, such
          provision or portion shall be deemed to be severed or limited, but
          only to the extent required to render the remaining provisions and
          portions of this Agreement enforceable. This Agreement as thus amended
          shall be enforced so as to give effect to the intention of the parties
          insofar as that is possible. In addition, the parties hereby expressly
          empower a court of competent jurisdiction to modify any term or
          provision of this Agreement to the extent necessary to comply with
          existing law and to enforce this Agreement as modified.

               10.  Governing Law. This Agreement shall be construed in
          accordance with the laws of the State of Illinois.

               11.  Counterparts. This Agreement may be signed in multiple
          counterparts, each of which shall be deemed to be an original for all
          purposes.




<PAGE>   8


         12. Acknowledgment. Jennings acknowledges that he has carefully read
and fully understands the terms and provisions of this Settlement Agreement and
General Release, has had the opportunity to be represented in this matter by
counsel of his own choosing, and that his execution of this Settlement Agreement
and General Release is voluntary. The parties agree that the language used in
this Agreement is the language chosen by the parties to express their mutual
intent, and that no rule of strict construction is to be applied to or against
any party hereto.

         IN WITNESS WHEREOF, the parties have executed this Agreement on the
date(s) set forth below.

                                METAL MANAGEMENT, INC., a Delaware
                                  corporation


                                By:     /s/ Albert A. Cozzi
                                        -----------------------------
                                Title:  Chairman
                                        -----------------------------
                                Date:   July 21, 1999
                                        -----------------------------


                                /s/ T. Benjamin Jennings
                                -------------------------------------
                                T. Benjamin Jennings

                                Date:   July 21, 1999
                                        -----------------------------