Document:

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                                  EXHIBIT 10.5

                                    AGREEMENT

     THIS AGREEMENT ("Agreement") is made as of the 1st day of June, 2004 but
effective as of June 1, 2004 (the "Effective Date"), by and between TOWER
FINANCIAL CORPORATION, an Indiana corporation (the "Company"), and MICHAEL D.
CAHILL (the "Executive").

     RECITALS

     1. The Company is engaged in the business of operating a bank holding
company.

     2. The Executive is experienced in financial related matters and is
suitable to the Company's Board of Directors to serve as Chief Financial Officer
of the Company and its wholly-owned bank subsidiary.

     3. The parties desire to set forth in writing the compensation to be paid
to the Executive in the event the Company terminates the employment of the
Executive without cause.

     AGREEMENT

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions set forth herein, the Company and the Executive agree as follows:

     ARTICLE I
     COMPENSATION UPON TERMINATION

     Section 1.01. Compensation Upon Termination.

     (a) Should the employment of the Executive be terminated by Company during
the term of employment without cause, Company shall pay to the Executive, within
forty-five (45) days after the date of termination, a sum equal to eighteen (18)
months' salary at the then-effective monthly rate of salary paid to Executive.

     (b) As used herein the term "cause" shall included, but not limited to,
Executive's repeated violation of a material Company policy or repeated failure
to perform any of the material duties or obligations of his position, or upon
any dishonesty of any kind or willful misconduct of the Executive, including,
but not limited to, theft of or other unauthorized personal use of Company
funds.

     (c) Payments to the Executive shall be considered severance pay in
consideration of the Executive's entire service during the term of employment.
The Company may, at its discretion, withhold from such payments any federal,
state, city, county or other taxes. The severance pay provided for herein shall
constitute the entire obligation of the Company to the Executive and full
settlement of any claim under law or in equity that the Executive might
otherwise assert against the Company or any of its employees, officers or
directors on account of such termination.

     ARTICLE II
     GENERAL

     Section 2.01. Governing Law.  This Agreement and the performance of the
parties under this Agreement shall be construed in accordance with the laws of
Indiana, and any action or proceeding that may be brought, arising out of, in
connection with, or by reason of this Agreement shall be governed by the laws of
Indiana, to the exclusion of the law of any other forum, and regardless of the
jurisdiction in which the action or proceeding may be instituted.

     Section 2.02. Modification and Entire Agreement.  No modification,
amendments, extension or alleged waiver of this Agreement or any provision
thereof will be binding upon the Executive or the Company unless in writing and
signed by the Executive and a duly authorized officer of the Company. From and
after the Effective

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Date, this Agreement shall constitute the agreement between the Executive and
the Company with respect to the matters contained herein and shall supersede and
replace any and all prior agreements and understandings, written or oral,
relating to such matters.

     IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written.

TOWER FINANCIAL CORPORATION

By: /s/ Donald F. Schenkel
    -------------------------------
    Donald F. Schenkel
    Chief Executive Officer
    ("Company")

    /s/ Michael D. Cahill
    -------------------------------
    Michael D. Cahill
    ("Executive")

                                       2<PAGE>
                                  EXHIBIT 10.7

                                  SUMMARY SHEET
                                       OF
                   DIRECTOR AND EXECUTIVE OFFICER COMPENSATION

DIRECTOR COMPENSATION

     Directors receive an annual retainer of $3,500 for their service on the
Board. They receive an attendance fee of $200 per board meeting and committee
meeting attended. The chairmen of the board's Audit Committee, Compensation
Committee and Nominating and Corporate Governance Committee each receive an
additional $100 for each committee meeting that they chair. Directors who are
also employees of the Company are not paid for their services on the Board. In
addition, the ordinary and necessary expenses of members of the Board of
Directors incurred in attending board and committee meetings are paid by the
Company. For the year ended December 31, 2004, total directors fees paid were
$107,833.

     On January 1, 2002, the Board of Directors adopted the Deferred
Compensation Plan for Non-Employee Directors (the "Directors Deferred Plan").
The Directors Deferred Plan allows each non-employee director to defer payment
of director fee and attendance fee compensation earned during each quarter. A
director must make an election whether or not to participate in the Directors
Deferred Plan. The Board of Directors administers the Directors Deferred Plan.
Deferred balances in the plan will accrue interest initially at 4%, subject to
change from time to time by the Compensation Committee of the Board of
Directors. The Directors Deferred Plan allows for payments of deferred
compensation upon the earlier of 10 years from the time a director becomes a
participant in the plan or retirement from the Board, in a lump sum amount or a
maximum of four installment payments. Of the directors fees paid during 2004,
$81,968 was deferred under the Directors Deferred Plan. The Directors Deferred
Plan is filed as Exhibit 10.20 to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 2001.

     Under the Company's 1998 Stock Option and Incentive Plan and 2001 Stock
Option and Incentive Plan (together, the "Stock Option Plans"), the Company may
award non-qualified stock options and performance shares to the directors. The
terms and conditions of these awards are set forth in the respective Stock
Option Plans. No such awards were made to any director in 2004.

NAMED EXECUTIVE OFFICERS

     The executive officers of the Company serve at the discretion of the Board
of Directors. From time to time, the Compensation Committee of the Board of
Directors reviews and determines the salaries that are paid to the Company's
executive officers. Salaries are intended to be competitive and reflect factors
such as individual performance, level of responsibility, and prior experience.
The following are the annual base salaries for 2004 and 2005 for the Company's
Chief Executive Officer and its other four most highly compensated executive
officers (the "Named Executive Officers") as identified in the Company's proxy
statement, dated March 10, 2005, including Kevin J. Himmelhaver, the Company's
former Executive Vice President, Chief Financial Officer and Secretary, who
resigned effective June 30, 2004; Michael D. Cahill, the Company's Executive
Vice President, Chief Financial Officer and Secretary, who began employment on
June 1, 2004; and Gary D. Shearer, an executive officer of Tower Bank & Trust
Company (the "Bank") who performs policy-making functions for the Company:

<TABLE>
<CAPTION>
NAME AND POSITION                     YEAR   BASE SALARY
-----------------                     ----   -----------
<S>                                   <C>    <C>
Donald F. Schenkel                    2005     $270,000
   Chairman of the Board,             2004     $246,661
   President and Chief Executive
   Officer

Curtis A. Brown                       2005     $175,000
</TABLE>

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<TABLE>
<S>                                   <C>    <C>
   Executive Vice President and       2004     $168,923
   Chief Lending Officer

Michael D. Cahill                     2005     $150,000
   Executive Vice President, Chief    2004     $131,643*
   Financial Officer and Secretary

Kevin J. Himmelhaver                  2005     $     -0-
   Former Executive Vice President,   2004     $135,198*
   Chief Financial Officer and
   Secretary

Gary D. Shearer                       2005     $125,000
   Senior Vice President and Trust    2004     $112,253
   Officer of the Bank
</TABLE>

*    annualized.

     Each of the Named Executive Officers is also eligible to receive an annual
incentive bonus and to receive awards under the Stock Option Plans. Incentive
compensation and stock option awards are intended to align the interests of
executive officers with those of the shareholders of the Company and to reward
performance that increases shareholder value. With respect to the annual
incentive bonus, the Compensation Committee of the Board has established
targeted net income and earnings per share growth goals for the 2005 fiscal
year. Each executive job classification has a specific bonus percentage level
based on the level of responsibility that it requires, the impact it can have on
the business and prior performance by the executive. For the fiscal 2005 fiscal
year, the Named Executive Officers have targeted bonus percentage levels ranging
from 15% to 60% of their salary. The incentive compensation awarded to the Named
Executive Officers is based upon the Company's actual financial performance
results as compared to the predetermined threshold, target, and maximum levels.
No bonus is paid for performance below the minimum threshold. Payment of
bonuses, if any, is normally made in the first quarter of the fiscal year after
the fiscal year during which bonuses were earned. Bonuses normally will be paid
in cash in a single lump sum, subject to payroll taxes and tax withholdings.

     The Named Executive Officers are also eligible to participate in the
Company's unfunded non-qualified deferred compensation plan (the "Deferred
Compensation Plan"), under which the Company may make discretionary
contributions not to exceed 20% of the incentive bonuses otherwise payable to
the participants. For fiscal year 2004, the Company contributed $33,830, or 17%
of the incentive bonuses earned by the participants for 2004, to the Deferred
Compensation Plan. Employer contributions are 100% vested at the end of the
[third] year after the calendar year for which the contribution was made. The
Deferred Compensation Plan is filed as Exhibit 10.19 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2001.

     Mr. Donald Schenkel is also a participant in the Company's Supplemental
Executive Retirement Plan (the "SERP"), which was restated as of January 1,
2004. The restated SERP is filed as Exhibit 10.18 to the Company's Annual Report
on Form 10-K for the year ended December 31, 2004.

     In 2004, the Compensation Committee awarded Mr. Michael D. Cahill ten-year
incentive stock options to purchase an aggregate of 12,500 shares of the
Company's common stock under the Company's 2001 Stock Option Plan, which options
vest in four annual increments.

     The Company may make annual matching contributions to the accounts of Named
Executive Officers under the Company's 401(k) Plan. The 401(k) Plan is filed as
Exhibit 4.3 to the Company's Registration Statement on Form S-8 (Registration
No. 333-64318). For 2004, the Company contributed a total of $13,182 to the
accounts of the Named Executive Officers.

     Mr. Schenkel has the use of a Company car, which is replaced every 4 years.
The Company also pays life insurance premiums for Mr. Schenkel.

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