<PAGE>

                                                           EXHIBIT 10.(i)(H)(5)


 
                          WAIVER AND FOURTH AMENDMENT
                                      TO
                          LONG TERM CREDIT AGREEMENT


     THIS WAIVER AND AMENDMENT (this "Waiver and Amendment") dated as of March
29, 1997 (the "Effective Date"), is made and entered into among MONTGOMERY WARD
& CO., INCORPORATED (the "Company") and the banks listed on the signature pages
hereof (herein, together with their respective successors and assigns,
collectively called the "Banks" and individually called a "Bank").

     WHEREAS the Banks are parties to that certain Long Term Credit Agreement
dated as of September 15, 1994, as amended (the "Long Term Credit Agreement"),
among Montgomery Ward & Co., Incorporated, various banks named therein, The
First National Bank of Chicago, as Documentary Agent, The Bank of Nova Scotia,
as Administrative Agent, The Bank of New York, as Negotiated Loan Agent, and
Bank of America National Trust and Savings Association, as Advisory Agent; and

     WHEREAS the Company desires that the Banks waive compliance by the Company
with certain financial covenants contained in the Long Term Credit Agreement;

     NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:

                                   ARTICLE I

                                    WAIVERS

     1.1 Waiver. (a) For the Fiscal Quarter ending March 29, 1997 (the "Waiver
Period"), the Banks hereby waive any noncompliance by the Company with the
provisions of Sections 11.3, 11.4, and 11.20, of the Long Term Credit Agreement.

     (b) The Banks hereby further waive compliance by the Company under Section
11.18 of the Long Term Credit Agreement with the ratio of Debt of the Company
and its Restricted Subsidiaries to Total Capitalization, such waiver being for
the sole purpose to permit the Company on March 31, 1997 to make a dividend of
(but not in excess of) $3,066,875 on its Debt-Like Preferred Stock.

     (c) The Banks hereby further waive any Event of Default under Section
13.1(c) of the Long Term Credit Agreement arising by reason of any payment or
other concession pursuant to the Finance Agreement Modifications referred to in
Section 3.2(a) hereof.

<PAGE>
 
     1.2 Modification of Finance Agreements. After the Effective Date, without
the written consent of the Required Banks, the Company will not, and will not
permit any Subsidiary to, enter into any amendment, waiver or modification with
respect to any Finance Agreement (hereinafter defined).

     1.3 Limitation on Waivers. The waivers contained herein are limited
precisely to their terms and shall not constitute an amendment, modification or
waiver generally or for any other purpose. The waivers contained herein shall
immediately terminate and cease to be effective upon breach by the Company of
its obligations under Section 1.2 hereof or any of the representations or
warranties contained in Article III.

                                  ARTICLE II

                                  AMENDMENTS
                                  ----------

     2.1 Signature Debt. Section 11.23 of the Long Term Credit Agreement is
amended to read in its entirety as follows:

          11.23 Limitation on Signature Debt. Not permit Signature to incur or
     permit to exist any Indebtedness for Borrowed Money, except (i)
     Indebtedness for Borrowed Money under the Signature Credit Agreement not
     exceeding $101,886,491 in aggregate principal amount, and (ii) Indebtedness
     for Borrowed Money of Signature to the Company or its other Subsidiaries.

     2.2 Seller Notes. Section 13.1(j) of the Long Term Credit Agreement is
amended by substituting "February 28, 2003" for "March 14, 1996".

     2.3 Inventory Financing. Section 13.1 of the Long Term Credit Agreement is
further amended by adding subsections (m) and (n) as follows:

          (m) Inventory Financing with GE Capital. The aggregate outstanding
     principal amount of indebtedness of the Company and its subsidiary,
     Lechmere, Inc. to GE Capital pursuant to its so-called vendor program shall
     at any time be less than $350,000,000.

          (n) Note Purchase Agreements. The occurrence of an event of default
     under the Company's Note Purchase Agreements dated as of March 1, 1993 and
     July 11, 1995, as amended. No waiver, amendment or other action by the
     noteholders with respect to any event of default under the such Note
     Purchase Agreements shall be effective to terminate the Event of Default
     arising under this Section 13.1(n).

     2.4 Termination Date. The definition of Termination Date is amended by
substituting "August 29, 1997" for "February 15, 1998".

                                       2
 
<PAGE>
 
                                  ARTICLE III

                        REPRESENTATIONS AND WARRANTIES
                        ------------------------------

     The Company hereby represents and warrants to the Agents and the Banks as
of the Effective Date:

     3.1 No Default. No Event of Default or Unmatured Event of Default will
exist after giving effect to this Waiver and Amendment.

     3.2 Finance Agreements. (a) Without limitation of Section 2.1, for the
Waiver Period the Company has obtained all necessary amendments, waivers or
modifications (collectively, the "Finance Agreement Modifications") in respect
of any financial covenants under the Finance Agreements so that during the
Waiver Period, no default or event of default shall exist under any of such
Finance Agreements as a result of noncompliance with any of such financial
covenants. The Company has furnished to the Agents copies of any amendment,
waiver or modification entered into on or after December 23, 1996 with respect
to any Finance Agreement. The Company has furnished to each of the Banks a true
and correct summary (dated as of 3/27/97) of the Finance Agreement
Modifications.

     (b) As used herein, "Finance Agreement" means any or all of the following:
(i) any and all agreements of the Company or any of its Subsidiaries evidencing
or governing the terms of any Indebtedness for Borrowed Money, (ii) the so-
called synthetic or operating lease agreements with Sumitomo Bank Leasing and
Finance, Inc. and Credit Lyonnais, as lessors, as amended, and (iii) any
agreements or notes (including the so-called Seller Notes referred to in Section
13.1(j) of the Long Term Credit Agreement) evidencing amounts owed by the
Company or a Subsidiary under the Retail Credit Program Agreement.

     3.3 Due Execution. The execution, delivery and performance of this Waiver
and Amendment, (i) are within the Company's corporate powers, (ii) have been
duly authorized by all necessary corporate action, (iii) do not require any
governmental approval which has not been previously obtained (and each such
governmental approval that has been previously obtained remains effective), (iv)
do not and will not contravene or conflict with any provision of law, or of any
judgment, decree or order, or of the Company's charter or by-laws, and (v) do
not and will not contravene or conflict with, or cause any Lien to arise under,
any provision of any agreement binding upon the Company, any Subsidiary or any
of their respective properties.

     3.4 Validity. The Long Term Credit Agreement as modified by this Waiver and
Amendment constitutes the legal, valid and binding obligations of the Company,
enforceable against it in

                                       3

<PAGE>
 
accordance with its respective terms, without defense, counterclaim or offset.

     3.5 Long Term Credit Agreement. All representations and warranties of the
Company contained in Sections 10.1, 10.2, 10.3, 10.4(a), 10.7, 10.10, 10.11,
10.12, 10.15 and 10.18 of the Long Term Credit Agreement are true and correct as
of the date hereof with the same effect as though made on the date hereof.

     3.6 Maturity of Seller Notes. The maturity of the Seller Notes referred to
in Section 13.1(j) of the Long Term Credit Agreement has been extended to
February 28, 2003.

     3.7 Inventory Financing with GE Capital. As of the Effective Date, the
aggregate outstanding principal amount of indebtedness of the Company and its
Subsidiary Lechmere, Inc. to GE Capital under its so-called vendor program is at
least $350,000,000.

                                  ARTICLE IV

                                    GENERAL

     4.1 Expenses. The Company agrees to pay all fees and expenses of McDermott,
Will & Emery as counsel to the Documentary Agent, the Administrative Agent and
the Negotiated Loan Agent in connection with the preparation, execution and
delivery of this Waiver and Amendment.

     4.2 Effectiveness. This Waiver and Amendment shall become effective as of
the Effective Date, subject to receipt by McDermott, Will & Emery as counsel to
the Agents of the following, each duly executed and dated the Effective Date and
in form and substance reasonably satisfactory to the Administrative Agent:

          (a) Waiver and Amendment. Counterparts of this Waiver and Amendment,
     whether on the same or different counterparts, executed by the Company and
     the Required Banks (or in the case of any Bank as to which an executed
     counterpart shall not have been so received, telegraphic, telefax, telex or
     other written confirmation of execution of a counterpart hereof by such
     Bank);

          (b) Finance Agreements. A certificate of an Authorized Officer of the
     Company to the effect that (i) attached thereto is an executed copy of each
     Finance Agreement Modification entered into during the period from December
     24, 1996 through the Effective Date, and (ii) each such Finance Agreement
     Modification is fully effective; and

                                       4

<PAGE>
 
          (c) Short Term Credit Agreement. A duly executed waiver and amendment
     to the Short Term Credit Agreement that has terms substantially identical
     to the terms of this Waiver and Amendment.

     4.3 Definitions. Except as otherwise herein specifically defined, all the
capitalized terms contained herein shall have the meaning ascribed to such terms
in the Long Term Credit Agreement.

     4.4 Reaffirmation. Except as hereinabove expressly provided, all the terms
and provisions of the Long Term Credit Agreement shall remain in full force and
effect and all references therein and in any related documents to the Long Term
Credit Agreement shall henceforth refer to the Long Term Credit Agreement as
modified by this Waiver and Amendment. This Waiver and Amendment shall be deemed
incorporated into, and a part of, the Long Term Credit Agreement.

     4.5 Successors. This Waiver and Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.

     4.6 Governing Law. This Waiver and Amendment shall be governed by and
construed in accordance with the laws of the State of Illinois.

     4.7 Counterparts. This Waiver and Amendment may be executed in any number
of counterparts and by the different parties on separate counterparts and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same agreement.

     4.8 Acknowledgement of Lechmere. By executing the acknowledgement to this
Waiver and Amendment, Lechmere, Inc. hereby confirms and agrees that the
Lechmere, Inc. Guaranty is, and shall continue to be in full force and effect
and is hereby ratified and confirmed in all respects, except that on or after
the Effective Date each reference therein to the "Long Term Credit Agreement"
shall refer to the Long Term Credit Agreement after giving effect to this Waiver
and Amendment.

                                       5

<PAGE>
 
     Delivered at Chicago, Illinois as of the day, month and year first above
written.

                                       MONTGOMERY WARD & CO., INCORPORATED


                                       By: /s/ Carol J. Harms
                                          --------------------------------
                                       Name:   Carol J. Harms
                                       Title:  Senior Vice President -
                                                 Finance


ACCEPTED AND APPROVED:

THE FIRST NATIONAL BANK OF CHICAGO,
in its individual capacity and in its
capacity as Documentary Agent


By: /s/ Linda M. Thompson
   -----------------------------
Name:   Linda M. Thompson
Title:  First Vice President


THE BANK OF NEW YORK, in its
individual capacity and in its capacity
as Negotiated Loan Agent


By: /s/ Michael Flannery
   -----------------------------
Name:   Michael Flannery


THE BANK OF NOVA SCOTIA, in its
individual capacity and in its
capacity as Administrative Agent


By: /s/ A.S. Norsworthy
   -----------------------------
Name:   A.S. Norsworthy
Title:  Sr. Team Leader-Loan Operations

                                       6

<PAGE>
 
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, in its
individual capacity and in its
capacity as Advisory Agent


By: /s/ Sandra S. Ober
   ------------------------------
Name:   Sandra S. Ober


CIBC INC.


By: /s/ William J. Koslo, Jr.
   ------------------------------
Name:   William J. Koslo, Jr.


NATIONSBANK, N.A.


By: /s/ Valerie C. Mills
   ------------------------------
Name:   Valerie C. Mills
Title:  Sr. Vice President


THE LONG-TERM CREDIT BANK OF JAPAN, LTD.


By:
   ------------------------------
Name:


CREDIT LYONNAIS CHICAGO BRANCH


By: /s/ Mary Ann Klemm
   ------------------------------
Name:   Mary Ann Klemm
Title:  Vice President and Group Head


BANCA COMMERCIALE ITALIANA,
CHICAGO BRANCH


By: /s/ Julian M. Teodori
   ------------------------------
Name:   Julian M. Teodori
Title:  Senior Vice President & Branch Manager

By: /s/ Matthew V. Trujillo
   ------------------------------
Name:   Matthew V. Trujillo
Title:   Assistant Vice President


<PAGE>
 
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH


By: 
   ------------------------------
Name:


THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH


By: /s/ Gus C. Browne II
   ------------------------------
Name:   Gus C. Browne II


THE NORTHERN TRUST COMPANY


By: /s/ Sidney R. Dillard
   ------------------------------
Name:   Sidney R. Dillard


THE SAKURA BANK, LTD.


By:
   ------------------------------
Name:


THE SANWA BANK, LIMITED, CHICAGO BRANCH


By: /s/ Tomomi Omura
   ------------------------------
Name:   Tomomi Omura
Title:  Assistant General Manager


SWISS BANK CORPORATION, CHICAGO BRANCH


By: /s/ Nancy Russell
   ------------------------------
Name:   Nancy Russell
Title:  SBC Director


By: /s/ Ernst Schirmer
   -----------------------------
Name:   Ernst Schirmer
Title:  Director Credit Risk Management


<PAGE>
 
UNITED STATES NATIONAL BANK OF OREGON


By:
   ------------------------------
Name:


UNION BANK OF CALIFORNIA, N.A.


By: /s/ Richard A. Sutter
   ------------------------------
Name:   Richard A. Sutter
Title:  Vice President


ABN AMRO BANK N.V.


By: /s/ David C. Sagers
   -----------------------------
Name:   David C. Sagers
Title:  Vice President


By: /s/ Ronald R. Richter
   -----------------------------
Name:   Ronald R. Richter
Title:  Group Vice President


FIRST BANK NATIONAL ASSOCIATION


By: /s/ Christopher H. Patton
   -----------------------------
Name:   Christopher H. Patton


THE FIRST NATIONAL BANK OF BOSTON


By: /s/ Judith C.E. Kelly
   ------------------------------
Name:   Judith C.E. Kelly
Title:  Vice President


THE FUJI BANK, LIMITED


By:
   ------------------------------
Name:
Title:


<PAGE>
 
PNC BANK, NATIONAL ASSOCIATION


By:
   ------------------------------
Name:


THE YASUDA TRUST AND BANKING CO., LTD.


By: /s/ Joseph C. Meek
   ------------------------------
Name:   Joseph C. Meek


THE FIRST NATIONAL BANK OF MARYLAND


By: /s/ Andrew W. Fish
   ------------------------------
Name:   Andrew W. Fish
Title:  Vice President


INSTITUTO BANCARIO SAN PAOLO DI TORINO, S.P.A.


By: /s/ Robert Wurster
   ------------------------------
Name:   Robert Wurster
Title:  First Vice President


By: /s/ Carlo Persico
   ------------------------------
Name:   Carlo Persico
Title:  Deputy General Manager


KREDIETBANK N.V.


By: /s/ Raymond F. Murray
   ------------------------------
Name:   Raymond F. Murray
Title:  Vice President


By: /s/ Robert Snauffer
   ------------------------------
Name:   Robert Snauffer
Title:  Vice President


<PAGE>
 
UNION BANK OF SWITZERLAND - NEW YORK BRANCH


By: /s/ Daniel R. Strickford
   ------------------------------
Name:   Daniel R. Strickford
Title:  Assistant Vice President


By: /s/ Samuel Azizo
   ------------------------------
Name:   Samuel Azizo
Title:  Vice President


WELLS FARGO BANK, N.A.


By:
   ------------------------------
Name:


<PAGE>
 
BANCA DI ROMA, S.P.A.


By:
   ------------------------------
Name:
Title:


By:
   ------------------------------
Name:
Title:


COMERICA BANK


By: /s/ Harve C. Light
   ------------------------------
Name:   Harve C. Light
Title:  Assistant Vice President


BANK OF AMERICA ILLINOIS


By: /s/ Sandra S. Ober
   ------------------------------
Name:   Sandra S. Ober


<PAGE>
 
GUARANTY REAFFIRMED:

LECHMERE, INC.


By: /s/ Carol J. Harms
   ------------------------------
Name:   Carol J. Harms
Title:  Vice President and Treasurer