<PAGE>

                                                                    EXHIBIT 10.6


                         INVESTMENT MANAGEMENT AGREEMENT

Dated as of July 28, 2005

BETWEEN:        PERSPECTIVE (BARBADOS) LIMITED, FORMERLY BRASCAN STRATEGIC ASSET
                MANAGEMENT LIMITED (BARBADOS), having its principal place of
                business at Cedar Court, Wildey Business Park, St. Michael,
                Barbados ("BSAML")

AND:            PENN TREATY NETWORK AMERICA INSURANCE COMPANY and AMERICAN
                NETWORK INSURANCE COMPANY, having their principal places of
                business at 3440 Lehigh Street, Allentown, PA, Fax: 610-967-6502
                (together and in both cases "Penn Treaty")





WHEREAS BSAML has expertise and experience in providing investment advice and
portfolio management;

WHEREAS Penn Treaty is the grantor of certain trusts established in connection
with the Coinsurance Agreement, effective as of June 30, 2005 (the "Coinsurance
Agreement"), among Penn Treaty and Imagine International Reinsurance Limited
("Imagine"), to secure Penn Treaty's obligations thereunder, including its
obligations under funds withheld arrangements;

WHEREAS Penn Treaty is obligated to deposit assets into trust accounts
established in connection with such trusts (the "Trust Investments");

WHEREAS Penn Treaty desires, and BSAML agrees, to enter into this investment
management agreement (this "Agreement") pursuant to which BSAML will manage the
Trust Investments in accordance with the attached investment guidelines;

WHEREAS Penn Treaty desires, and BSAML agrees, to also provide to Penn Treaty
specialized administrative and advisory services (collectively with the
management of the Trust Investments, the "Services") as mutually agreed between
them and as may be modified in writing from time to time during the term of this
Agreement.

TERM

        This Agreement commences effective June 30, 2005 and will continue
through December 31, 2005 (the "Term"). Notwithstanding the foregoing, Penn
Treaty may in its reasonable discretion terminate this Agreement, following
written notice to Imagine (at 43 St. Stephen's Green, Dublin 2, Ireland,
Attention: Director), should BSAML:

<PAGE>

1.      Fail to deliver proper and complete reporting information on a timely
        basis, if such failure has, or could reasonably be expected to have, a
        material adverse effect on Penn Treaty; and/or

2.      Demonstrate gross negligence or willful misconduct in the performance of
        its duties under this Agreement;

3.      Demonstrate a breach of (a) BSAML's Representations, Warranties, and
        Covenants which remains uncured for a period of thirty (30) days
        following the date on which BSAML received written notice of such breach
        from Penn Treaty, or (b) BSAML's Confidentiality obligations (in each
        case, except for any breach that has not had, and could not reasonably
        be expected to have, a material adverse effect on Penn Treaty);

4.      Undergo a change of ownership such that Imagine and its affiliates cease
        to collectively own, directly or indirectly, at least one-half of the
        ownership interests of BSAML.

        Following such notice of termination, Penn Treaty and Imagine will
cooperate in good faith to select a new investment manager. Subject to the
written consent of Imagine, Penn Treaty shall enter into an agreement with such
selected new investment manager to provide services such as the Services
hereunder.

        To the extent permitted by applicable law, upon termination of this
Agreement, BSAML shall within twenty (20) business days return to Penn Treaty
all of Penn Treaty's books and records, and all other information relating to
the Trust Investments (including any copies thereof) then in BSAML's possession,
except for any software or other intellectual property that is proprietary to,
or owned or licensed by, BSAML or any of its affiliates, which shall remain the
property of BSAML.

INVESTMENT MANAGEMENT SERVICES

        BSAML will use its best judgment and effort in rendering the Services,
using a degree of skill and attention no less than that which BSAML exercises
with respect to comparable assets that it manages for itself and for others in
accordance with its existing practices and procedures relating to assets of the
nature and character of the Trust Investments, except as expressly provided
otherwise in this Agreement.

        BSAML will manage the Trust Investments in accordance with the attached
investment guidelines as amended from time to time by Penn Treaty with the
consent of Imagine (the "Investment Guidelines") and in accordance with all
applicable laws. Imagine is an express third party beneficiary of this
Agreement, and this Agreement may not be amended without the consent of Imagine.
A copy of the Investment Guidelines is annexed hereto as Schedule 1.

        BSAML will provide industry-standard financial, performance and
compliance reporting on a monthly and quarterly basis, and where possible, will
fulfill any reasonable custom reporting requirements requested in writing by
Penn Treaty. BSAML will manage the Trust Investments only through the trustees
and custodian banks recommended and approved by Penn

<PAGE>

Treaty to hold the Trust Investments. The final form of all reports will be
mutually agreed between Penn Treaty and BSAML prior to September 1, 2005.

INVESTMENT MANAGEMENT FEE

        Penn Treaty shall pay BSAML an investment management fee of 0.08% per
annum of assets under management (the "Investment Fee"), payable quarterly in
arrears no later than on the tenth (10th) business day following the end of each
quarter during the Term. For the purpose of calculating the Investment Fee, the
amount of assets under management for any applicable period shall be determined
by dividing (a) the sum of the aggregate statutory book value of the Trust
Investments as of the first day of such period AND the aggregate statutory book
value of the Trust Investments as of the final day of such period (after taking
into account any increase or decrease in the Trust Investments credited as of
such final day), by (b) 2. Any Investment Fee payable for less than a full
calendar quarter shall be pro-rated such that fees will only be calculated for
assets under management from the date of this Agreement and not from the
effective date of the Coinsurance Agreement. Upon any termination of this
Agreement other than at the end of a calendar quarter, the Investment Fee shall
be calculated as of the termination date.

        In the event that BSAML elects to sub-contract with a third party
investment advisor for a portion of the Trust Investments, fees due such third
party investment advisor will be for the account of BSAML. Said fees shall not
include fees payable to managers of investment products such as hedge funds,
collateralized debt obligations or other investment vehicles, which fees shall
be deducted from the Trust Investments so invested and the cost included in the
total rate of return calculation for the relevant investment.

PERFORMANCE FEE

Penn Treaty and BSAML shall use their best efforts to agree, by no later than
October 31, 2005, on a performance fee formula for BSAML in order to compensate
BSAML for effective yield enhancement of the Trust Investments. Such performance
fee formula will be subject to the written consent of Imagine.

EXPENSES

        Each party will be responsible for its own ordinary costs and expenses
incurred in the course of performing its obligations under this Agreement.

ANCILLARY SERVICES

        BSAML may also provide ancillary financial reporting, administrative and
advisory services to Penn Treaty (including advice on asset/liability matching
and credit analysis) on terms, including fees, as mutually agreed to between the
parties in advance.

REPRESENTATIONS, WARRANTIES, AND COVENANTS

<PAGE>

        a)      Penn Treaty represents, warrants, and covenants to BSAML that,
                as of the date hereof and throughout the Term:

                i)      the appointment of BSAML as Penn Treaty's investment
                        manager has been duly and properly authorized by Penn
                        Treaty in accordance with its charter, by-laws and other
                        applicable documents ("Corporate Documents") and the
                        Investment Guidelines are in compliance with such
                        Corporate Documents and with all legal and regulatory
                        restrictions applicable to Penn Treaty and the Trust
                        Investments;
                ii)     this Agreement constitutes a valid and binding
                        obligation of Penn Treaty, enforceable against Penn
                        Treaty in accordance with its terms, except to the
                        extent such enforceability may be limited by applicable
                        bankruptcy, insolvency, reorganization, or similar laws
                        affecting the rights of creditors generally and by
                        general equity principles;
                iii)    Penn Treaty has legal title to the Trust Investments and
                        no restrictions exist as to the ownership or transfer of
                        such Trust Investments unless specifically set forth in
                        this Agreement; and
                iv)     Penn Treaty is, and will remain during the term of this
                        Agreement, engaged primarily in the insurance business.

        b)      BSAML represents, warrants, and covenants to Penn Treaty that,
                as of the date hereof and throughout the Term:

                i)      it is, and will remain during the Term, an entity in
                        good standing under the laws of its jurisdiction of
                        organization and duly licensed, if necessary, to conduct
                        its investment management business under applicable law;
                ii)     this Agreement constitutes a valid and binding
                        obligation of BSAML, has been duly and properly
                        authorized by BSAML in accordance with its charter,
                        by-laws and other applicable documents, is enforceable
                        against BSAML in accordance with its terms, except to
                        the extent such enforceability may be limited by
                        applicable bankruptcy, insolvency, reorganization, or
                        similar laws affecting the rights of creditors generally
                        and by general equity principles;
                iii)    it currently has, and agrees that it will maintain,
                        access to the skilled personnel, computer hardware and
                        software, and other facilities necessary to prepare the
                        reports and perform the services required by this
                        Agreement; and
                iv)     it will notify Penn Treaty of any material change in the
                        resources devoted to managing the Trust Investments,
                        within a reasonable time after such change.

CONFIDENTIALITY

        From time to time in the course of the performance of this Agreement,
Penn Treaty will be providing BSAML with certain financial, strategic and other
information. BSAML shall keep confidential any and all information obtained in
connection with the services rendered hereunder

<PAGE>

and shall not disclose any such information to non-affiliated third parties
until the day that falls 24 months after such information was acquired by BSAML
in connection with the services rendered hereunder, except (i) with the prior
written consent of Penn Treaty, (ii) as required by law, regulation, court order
or the rules or regulations of any self-regulating organization, body or
official having jurisdiction over BSAML, (iii) to its professional advisors,
(iv) in connection with effecting any transactions contemplated hereunder on
behalf of Penn Treaty, (v) such information as shall have been publicly
disclosed other than in violation of this Agreement, or such information as
shall have been obtained by BSAML on a non-confidential basis; provided that
BSAML does not know or have reason to know, after due inquiry, of any breach by
such source of any confidentiality obligations with respect thereto, or (vi)
where such disclosure is necessary to perform all or any of its functions
hereunder or to protect the interests of BSAML.

NON-EXCLUSIVITY

        The Services provided by BSAML to Penn Treaty are not exclusive, and
BSAML shall be free to render investment management services to others. It is
understood and agreed that the officers and directors of BSAML may engage in
other business activities or render services to other persons or serve as
partners, officers or directors of other firms or corporations.

CONFLICTS OF INTEREST

        Penn Treaty understands and acknowledges the following:

        1.      Various potential and actual conflicts of interest may arise
                from the overall advisory, investment and other activities of
                BSAML and any of its affiliates and their respective clients;
        2.      Penn Treaty will not be the only client of BSAML;
        3.      BSAML and its affiliates have, and in the future may have, other
                clients, including insurance companies, which invest, directly
                or indirectly, in the securities or financial instruments of the
                type set forth in the Investment Guidelines;
        4.      BSAML, its affiliates and principals, officers and employees of
                BSAML and its affiliates will conduct businesses other than that
                with respect to Penn Treaty, including providing investment
                management services to other clients;
        5.      Although the principals, officers and employees of BSAML will
                devote as much time to Penn Treaty as BSAML deems appropriate to
                accomplish the objectives of this Agreement, the principals,
                officers and employees of BSAML may have conflicts allocating
                their time and services among Penn Treaty and other clients of
                BSAML; and
        6.      BSAML is an affiliate of Imagine, and consequently BSAML may
                have certain potential or actual conflicts of interest in
                managing the Trust Investments for Penn Treaty, but for the
                benefit of Imagine.

LIABILITY OF INVESTMENT MANAGER

<PAGE>

        BSAML shall not have any responsibility under this Agreement other than
to render the Services. BSAML, its directors, officers, members, agents and
employees and any affiliate of BSAML and its directors, officers, stockholders,
members, partners, agents and employees (collectively, the "Specified Parties")
shall not be responsible for any action of Penn Treaty in declining to follow
any advice, recommendation or direction of any Specified Party. The Specified
Parties shall have no liability to Penn Treaty for any error of judgment,
mistake of law, or for any loss arising out of any investment, or for any other
act or omission in the performance of its obligations to Penn Treaty, except for
liability to which it would be subject by reason of willful misconduct, bad
faith, gross negligence or reckless disregard of its duties and obligations
hereunder; it being expressly understood by the parties hereto that nothing in
this Section is intended to, or shall constitute, either directly or indirectly,
a waiver of any legal rights or remedies that Penn Treaty may otherwise have
against any Specified Party that cannot be waived under applicable law. BSAML
may delegate to an agent, accountant, expert, attorney and nominee (including
its Affiliates) selected with reasonable care any or all of the duties assigned
to BSAML hereunder (including the duty to render advice (including investment
advice) and assistance to Penn Treaty), provided that no delegation by BSAML of
any of its duties hereunder shall relieve BSAML of any of its duties hereunder
nor relieve BSAML of any liability with respect to the performance of such
duties, except that BSAML may, with respect to the affairs of Penn Treaty,
consult with nationally recognized counsel and accountants in their capacity as
such reasonably selected by BSAML and shall be fully protected, to the extent
permitted by applicable law, in acting or failing to act hereunder if such
action or inaction is taken or not taken in good faith by BSAML in accordance
with the written advice or opinion of such counsel or accountants. BSAML shall
not be liable for any consequential damages hereunder.

INDEMNIFICATION

        Penn Treaty shall reimburse, indemnify and hold harmless each Specified
Party from any and all expenses, losses, damages, liabilities, demands, charges
and claims of any nature whatsoever (including reasonable attorneys' fees and
expenses), as are incurred in investigating, preparing, pursuing or defending
any claim, action, proceeding or investigation with respect to any pending or
threatened litigation caused by, or arising out of or in connection with, any
acts or omissions of any Specified Party made in good faith and in the
performance of such Specified Party's duties under this Agreement and not
determined as constituting bad faith, willful misconduct, gross negligence or
reckless disregard of its duties hereunder or thereunder. Each Specified Party
may consult with counsel and accountants with respect to its duties hereunder
and shall be fully protected and justified, to the extent allowed by law, in
acting, or failing to act, if such action or failure to act is taken or made in
good faith and is in accordance with the advice or opinion of such counsel or
accountants. The indemnification provided by this Section shall be in addition
to any rights to which a Specified Party may otherwise be entitled by contract
or as a matter of law, and shall extend to each of its or his or her heirs,
successors and assigns. The provisions of this Section shall continue to afford
protection to each Specified Party regardless of whether such Specified Party
remains in the position or capacity pursuant to which such Specified Party
became entitled to indemnification under this Section.

PREAMBLE

<PAGE>

        The preamble hereto forms an integral part hereof.

SEVERABILITY

        Each of the provisions of this Agreement shall be severable from all
other provisions and invalidity of any part hereof shall not affect the validity
of other parts of this Agreement.

NO JOINT VENTURE OR AGENCY

        Nothing in this Agreement shall create or imply any agency or joint
venture on the part of the parties hereto.

DISPUTE RESOLUTION

        All disputes hereunder shall be settled by arbitration. The arbitration
shall be conducted under the commercial arbitration rules of the American
Arbitration Association then in effect (the "Rules"). The arbitration shall be
conducted before a single arbitrator and the award shall be made in New York,
New York. The arbitrator shall be chosen by agreement of the parties. In the
event that the parties cannot agree on an arbitrator, the arbitrator shall be
selected from the aforementioned panel pursuant to the Rules. The decision of
the arbitrator shall be binding on both parties, and judgment upon the award
rendered by the arbitrator may be entered in any court of appropriate
jurisdiction. If a party is seeking injunctive relief or specific performance,
that party may apply to a court of competent jurisdiction for such equitable
relief.

GOVERNING LAW

        This Agreement will be governed by, and construed in accordance with,
the laws of the State of New York.

COUNTERPARTS/FAX SIGNATURE

        This Agreement may be executed in counterparts and/or by facsimile, each
of which shall be deemed an original, but all of which shall constitute one
agreement.

NOTICE PROVISIONS

        Any notices, requests for consents or other communications in relation
to this Agreement shall be made in writing and addressed to the applicable party
at the address set forth on the first page of this Agreement, or to such other
address as either party may designate to the other in writing in accordance with
this section. Any such notice or other communication shall be deemed received
upon personal delivery, confirmed facsimile delivery or on the second day after
delivery by a reputable courier.

<PAGE>

NO ASSIGNMENT

        This Agreement may not be assigned by either party without the prior
written consent of the other party. In the event of an assignment of this
Agreement, the provisions hereof shall inure to the benefit of and be binding
upon the parties and their respective successors and assigns.

ENTIRE AGREEMENT

        This Agreement sets forth the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior written, oral or
electronic communications relating to this subject matter. This Agreement may
only be modified in writing, signed by both parties, and no waiver of compliance
with any provision or condition, and no consent provided for in this Agreement,
shall be effective unless in writing, duly executed by the party sought to be
charged with such waiver or consent.

NO WAIVER

        Waiver by any party of any breach or failure to comply with any
provision of this Agreement by the other party shall not be construed as, or
constitute, a continuing waiver of such provision or a waiver of any other
breach of or failure to comply with any other provision of this Agreement.


             THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

<PAGE>

IN WITNESS WHEREOF the parties have signed as of the date first hereinabove
mentioned.


PERSPECTIVE (BARBADOS) LIMITED, FORMERLY BRASCAN STRATEGIC ASSET MANAGEMENT
LIMITED (BARBADOS)

By:   /s/ Maria Nicholls
Its:  Maria Nicholls, Director

By:   /s/ Trevor Carmichael
Its:  Trevor Carmichael, Director


PENN TREATY NETWORK AMERICA INSURANCE COMPANY

By:   /s/ Cameron B. Waite
Its:  Executive Vice President

By:   ______________________________
Its:  ______________________________


AMERICAN NETWORK INSURANCE COMPANY

By:   /s/ Cameron B. Waite
Its:  Executive Vice President

By:   ______________________________
Its:  ______________________________