Letter Agreements Between AEPSC and John B. Keane


    EXHIBIT
      10(h)(5)

     

    Mr.
      John
      B. Keane

    49
      Bainbridge Rd

    West
      Hartford, CT 06119

    


    June
      14,
      2004

    


    Dear
      Jack,

    


    Per
      our
      prior discussions, I’m very interested in having you as a key executive on the
      management team at AEP. I would like you to become our Senior Vice President,
      General Counsel and Secretary. In this position you would report directly to
      me
      and your office would be located in our corporate headquarters in Columbus,
      Ohio. Your start date would be July 1 or earlier if you are
      available.

    


    As
      discussed, your salary would initially be $350,000, reviewed annually, and
      you
      would participate in an annual incentive compensation plan with an incentive
      target of 50% of your base earnings. Actual annual incentive awards may range
      from 0 - 200% of your incentive target and awards are generally paid by the
      middle of March after year-end results are confirmed and awards
      approved.

    


    You
      would
      also receive 15,000 AEP restricted stock units upon hire. These would vest,
      subject to your continued AEP employment, in one-third increments on the first
      through the third anniversary of the grant date. 

    


    You
      would
      also be eligible to participate in our Long-Term Incentive Plan. This plan
      currently provides a mix of stock options and performance shares with the awards
      granted toward the end of the year following approval by the Human Resources
      Committee of AEP’s Board of Directors. 

    


    Should
      you find this offer acceptable, we would need to continue the employment
      process. Melinda Ackerman, our SVP of Human Resources, would need to contact
      you
      to finalize the employment process (application, physical examination and drug
      test) and would provide a summary of AEP’s executive benefits, discuss temporary
      housing, relocation benefits, etc.

    


    I
      look
      forward to hearing from you.

    


    Sincerely,

    


    /s/
      Michael G. Morris

    


    Michael
      G. Morris

    


    C:
      Melinda S. Ackerman

    


    



    
      
        
          


        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    Mr.
      John
      B. Keane

    49
      Bainbridge Rd

    West
      Hartford, CT 06119

    


    June
      17,
      2004

    


    Dear
      Jack:

    


    In
      reply
      to your letter of June 16 and the discussion with Melinda Ackerman, in addition
      to the provisions of my employment offer to you dated June 14, we will provide
      the following:

    


    1.
      You
      will be eligible for a lump-sum severance payment, less applicable tax
      withholdings, equal to your annual base salary in effect on the date of your
      termination if, for any reason other than cause, the company terminates your
      employment with AEP within three years of your date of hire. Such payment would
      be conditioned upon your agreement to release AEP from any and all claims
      involving your employment with or termination from AEP.

    


    2.
      As a
      key AEP executive you will also be eligible for AEP’s Change-in-Control
      Agreement. While this agreement is currently being revised due to a recently
      passed shareholders’ proposal, a confirmation letter and the document will be
      provided upon revision and approval by the Human Resources Committee of the
      AEP
      Board of Directors.

    


    3.
      In
      recognition of your prior experience, your cash balance account under the
      pension plans shall be credited with an amount such that the total cash credit
      under these plans (the AEP Retirement Plan and the AEP Excess Benefit Plan)
      shall be the maximum permitted under such plans as amended from time to time
      (currently 8.5%) on all eligible earnings. Eligible earnings may not currently
      exceed the greater of $1,000,000 or two time your base rate, annually. All
      other
      provisions of the two plans as in effect from time to time shall apply to your
      participation therein. The specifics of each of the benefit plans will be
      provided and reviewed with you by the Human Resources staff.

    


    I
      believe
      this addresses your concerns. However, please feel free to give us a call should
      there be additional questions. I look forward to seeing you on July
      1.

    


    Sincerely,

    


    /s/
      Michael G. Morris

    


    Michael
      G. Morris

    


    C:
      Melinda S. Ackerman