SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 8-K

                 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934



       Date of report (date of earliest event reported): January 18, 2001



                       INTERCONTINENTAL LIFE CORPORATION
               (Exact name of Registrant as specified in charter)



           Texas                        0-7288              22-1890938
(State or other jurisdiction    (Commission file number)    (I.R.S. employer
        of incorporation)                                    identification no.)








                      6500 River Place Blvd., Building One
                              Austin, Texas 78730
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (512) 404-5000


                                      -1-

<PAGE>

ITEM 5. Other Events

     On January 18, 2001, Financial Industries Corporation,  a Texas corporation
("FIC"),  and  InterContinental  Life Corporation,  a Texas corporation ("ILCO")
jointly  announced  that their  respective  Boards of Directors  have approved a
definitive  agreement  whereby FIC would  acquire the  remaining  common  shares
(approximately  52%) of ILCO  which FIC does not  currently  own.  The terms and
provisions of the  transaction  are set forth in an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of January 18, 2001, among FIC, ILCO and ILCO
Acquisition  Company,  a Texas  corporation and  wholly-owned  subsidiary of FIC
("Merger  Sub").  Subject to the conditions  set forth in the Merger  Agreement,
Merger  Sub will be  merged  with and into  ILCO,  with ILCO  continuing  as the
surviving  corporation  (the "Merger") and as a wholly-owned  subsidiary of FIC.
Pursuant to the Merger  Agreement,  1.1 shares of common stock,  par value $0.20
per share ("FIC Common  Stock"),  will be issued for each share of common stock,
par value  $0.22 per share,  of ILCO ("ILCO  Common  Stock") not held by FIC. In
addition,  each share of ILCO Common  Stock  issuable  pursuant  to  outstanding
options will be converted into options to receive 1.1 shares of FIC Common Stock
with the exercise price adjusted accordingly.

     The consummation of the Merger is subject to various  conditions  precedent
contained in the Merger Agreement,  including,  without limitation,  approval of
certain matters by the shareholders of each of FIC and ILCO.

ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.

        (c)     Exhibits.
                10.1*   -       Agreement and Plan of Merger, dated as of
                                January 18, 2001, among InterContinental Life
                                Corporation, Financial Industries
                                Corporation and ILCO Acquisition Company.
                99.1*   -       Press Release dated January 18, 2001.
                ______________
                * Filed herewith


                                      -2-

<PAGE>

                                   SIGNATURES
     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.


INTERCONTINENTAL LIFE CORPORATION

By:       /s/ James M. Grace
Name:  James M. Grace
Title:    Vice President and Treasurer

Date:  January 22,  2001





                                      -3-

<PAGE>



                                                                    EXHIBIT 10.1

                          AGREEMENT AND PLAN OF MERGER

     THIS  AGREEMENT AND PLAN OF MERGER (this  "Agreement")  is made and entered
into as of January 18, 2001, by and among Financial  Industries  Corporation,  a
Texas corporation  ("FIC"),  ILCO Acquisition  Company,  a Texas corporation and
wholly-owned  subsidiary  of  FIC  ("Merger  Sub"),  and  InterContinental  Life
Corporation, a Texas corporation ("ILCO").

                                    RECITALS

     WHEREAS,  FIC currently  owns  approximately  48% of the common stock,  par
value $0.22 per share of ILCO ("ILCO Common Stock");

     WHEREAS,  it is proposed that FIC acquire all of the issued and outstanding
shares of ILCO  Common  Stock not owned by FIC by way of a merger of Merger  Sub
with and into ILCO, with ILCO surviving the merger as a wholly-owned  subsidiary
of FIC;

     WHEREAS,  FIC,  ILCO and Merger Sub believe it is in the best  interests of
their  respective  shareholders  to consummate the merger of Merger Sub with and
into ILCO in  accordance  with the terms and subject to the  conditions  of this
Agreement;

     WHEREAS, upon the terms and subject to the conditions set forth herein, the
Board  of  Directors  of  FIC,  upon  the  unanimous  recommendation  of a  duly
authorized   special  committee  thereof   (consisting   solely  of  independent
directors),  has approved the Agreement,  the merger of Merger Sub with and into
ILCO and the issuance of shares of common stock,  par value $0.20 per share (the
"FIC Common  Stock"),  of FIC in connection  therewith and has  recommended  the
approval of the issuance of shares of common stock under this Agreement by FIC's
shareholders;  WHEREAS,  upon the terms and subject to the  conditions set forth
herein,  the Board of Directors of ILCO, upon the unanimous  recommendation of a
duly authorized  special  committee  thereof  (consisting  solely of independent
directors),  has  approved  such  merger and has  recommended  approval  of this
Agreement by ILCO's shareholders;

     WHEREAS,  the Board of  Directors of Merger Sub has approved the merger and
has  recommended  approval of this  Agreement  by FIC, as its sole  shareholder;
WHEREAS,  it is the  intention of FIC, ILCO and Merger Sub that such merger will
qualify as a tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and

     WHEREAS,  FIC, ILCO and Merger Sub desire to make certain  representations,
warranties,  covenants and agreements in connection with such merger and also to
prescribe various conditions to such merger.

                                      -1-

<PAGE>

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this  Agreement,  and for other good and  valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereto
hereby agree as follows:

                                   ARTICLE I
                                   THE MERGER

     1.1 The  Merger.  Upon the  terms and  subject  to the  conditions  of this
Agreement,  at the Effective Time (as defined in Section 1.3),  Merger Sub shall
merge with and into ILCO (the  "Merger") in accordance  with the Texas  Business
Corporation  Act  (the  "Texas  Code").  At the  Effective  Time,  the  separate
corporate  existence  of Merger Sub shall  cease and ILCO shall  continue as the
surviving corporation of the Merger (the "Surviving Corporation") under the laws
of the  State  of  Texas  and  with  all  the  rights,  privileges,  properties,
franchises,   immunities  and  powers,   and  subject  to  all  the  duties  and
liabilities,  of a corporation  organized under the Texas Code. The Merger shall
have the effects  set forth in the Texas Code  (including,  without  limitation,
Article 5.06 of the Texas Code).

     1.2  Closing.  Unless this  Agreement  shall have been  terminated  and the
transactions  herein  contemplated shall have been abandoned pursuant to Section
8.1, and subject to the  satisfaction  or waiver of the  conditions set forth in
Article VII, the closing of the Merger (the  "Closing") will take place at 10:00
a.m., Austin, Texas time, on the second business day following the date on which
the last to be  fulfilled or waived of the  conditions  set forth in Article VII
shall be fulfilled or waived in  accordance  with this  Agreement  (the "Closing
Date"),  at the offices of FIC,  6500 River Place  Blvd.,  Austin,  Texas 78730,
unless another date, time or place is agreed to by the parties hereto.

     1.3  Effective  Time.  The parties  hereto shall file with the Secretary of
State of the State of Texas (the "Texas Secretary of State") on the Closing Date
(or on such other date as the  parties  may agree)  articles  of merger or other
appropriate  documents,  executed in accordance with the relevant  provisions of
the Texas Code,  and make all other  filings or  recordings  required  under the
Texas Code in connection with the Merger. The Merger shall become effective upon
the filing of the articles of merger with the Texas  Secretary  of State,  or at
such later time specified in such articles of merger (the "Effective Time").

     1.4 Articles of Incorporation.

     (a) The Articles of Incorporation of Merger Sub in effect immediately prior
to  the  Merger  shall  be  the  Articles  of  Incorporation  of  the  Surviving
Corporation  until  thereafter  amended in  accordance  with their  terms and as
provided by the Texas Code.

     (b)  Concurrently  with the execution and delivery of this  Agreement,  the
Board of Directors of FIC has adopted a resolution  setting  forth and approving
an amendment to the  Articles of  Incorporation  of FIC in the form set forth as
Annex I hereto  (the  "Charter  Amendment"),  and  directing  that  the  Charter
Amendment  be  considered  by the  shareholders  of FIC at the FIC  Shareholders
Meeting (as defined in Section 5.2(b)), all in accordance with the provisions of
the Texas Code.  Prior to the Effective  Time of the Merger,  FIC shall file the
Charter Amendment with the Texas Secretary of State.

                                      -2-

<PAGE>

     1.5  Bylaws.  The Bylaws of Merger Sub in effect  immediately  prior to the
Merger shall be the bylaws of the Surviving Corporation until thereafter amended
in accordance with their terms and as provided by applicable law.

     1.6  Directors.  The  directors  of  Merger  Sub  immediately  prior to the
Effective Time shall, from and after the Effective Time, be the directors of the
Surviving  Corporation  until their  successors  shall have been duly elected or
appointed or qualified or until their earlier  death,  resignation or removal in
accordance  with the  Surviving  Corporation's  Articles  of  Incorporation  and
Bylaws.

     1.7 Officers. The officers of Merger Sub immediately prior to the Effective
Time shall,  from and after the Effective Time, be the officers of the Surviving
Corporation  until their successors shall have been duly elected or appointed or
qualified or until their  earlier  death,  resignation  or removal in accordance
with the Surviving Corporation's Articles of Incorporation and Bylaws.

     1.8 Effect on ILCO Capital Stock.

     (a) Outstanding  ILCO Common Stock.  Each share of ILCO Common Stock issued
(and not cancelled or retired)  immediately  prior to the Effective  Time (other
than shares of ILCO Common Stock held as treasury  shares by ILCO (but excluding
shares of ILCO Common Stock held by any of ILCO's  subsidiaries,  whether or not
treated as treasury shares of ILCO on a consolidated basis under GAAP) or shares
of ILCO Common Stock held by FIC) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to receive
1.1 validly issued, fully paid and nonassessable shares of FIC Common Stock. The
ratio of the shares of FIC Common  Stock to be issued in exchange for each whole
share of ILCO Common Stock is referred to as the "Exchange Ratio." The shares of
FIC Common Stock to be issued to holders of ILCO Common Stock in accordance with
this Section 1.8(a),  and any cash to be paid in accordance with Section 1.11(f)
in lieu of fractional shares of FIC Common Stock, are referred to as the "Merger
Consideration."

     (b) Treasury Shares;  FIC-Owned Shares. Each share of (i) ILCO Common Stock
and (ii) series A preferred  stock and series B preferred stock of ILCO, in each
case which is held as treasury  shares by ILCO at the Effective Time  ("Treasury
Shares")  (excluding  shares  of  ILCO  Common  Stock  held  by  any  of  ILCO's
subsidiaries,   whether  or  not  treated  as  treasury  shares  of  ILCO  on  a
consolidated  basis under  GAAP),  and each share of ILCO Common  Stock which is
held by FIC  (excluding  any shares of ILCO  Common  Stock owned by any of FIC's
subsidiaries)  at the Effective Time ("FIC-Owned  Shares"),  shall, by virtue of
the Merger and without any action on the part of ILCO or FIC, be  cancelled  and
retired and cease to exist, without any conversion thereof.

                                      -3-

<PAGE>

     (c) Impact of Stock  Splits,  etc. In the event of any change in FIC Common
Stock  and/or  ILCO Common  Stock  between  the date of this  Agreement  and the
Effective  Time of the Merger in accordance  with the terms of this Agreement by
reason  of any  stock  split,  stock  dividend,  subdivision,  reclassification,
recapitalization,  combination,  exchange of shares or the like,  the number and
class of shares of FIC Common Stock to be issued and  delivered in the Merger in
exchange  for each  outstanding  share of ILCO Common  Stock as provided in this
Agreement  shall  be  appropriately  adjusted  so as to  maintain  the  relative
proportionate  interests  of the  holders  of ILCO  Common  Stock and FIC Common
Stock.

     1.9 Effect on FIC Capital Stock.  Each share of FIC Common Stock issued and
outstanding  immediately  prior  to  the  Effective  Time  (including,   without
limitation,  shares of FIC Common Stock held by any  subsidiary  of FIC or ILCO)
shall remain outstanding and shall be unaffected by the Merger.

     1.10 Effect on Merger Sub Capital Stock. Each share of common stock,  $0.01
par  value,  of Merger  Sub  issued  and  outstanding  immediately  prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder  thereof,  be converted into one share of common stock,  $0.01 par
value,  of the  Surviving  Corporation  and  such  shares  shall,  collectively,
represent  all of the  issued and  outstanding  capital  stock of the  Surviving
Corporation.

     1.11 Exchange of Certificates.

     (a) Paying  Agent.  Immediately  following the  Effective  Time,  FIC shall
deposit with its transfer  agent and  registrar  (the "Paying  Agent"),  for the
benefit of the holders of ILCO Common  Stock  (other  than  Treasury  Shares and
FIC-Owned Shares),  certificates  representing the shares of FIC Common Stock to
be issued to such holders pursuant to Section 1.8 (such  certificates,  together
with any dividends or  distributions  with respect to the shares  represented by
such  certificates and any cash paid in lieu of fractional  shares of FIC Common
Stock pursuant to Section 1.11(f), being hereinafter referred to collectively as
the "Payment Fund").

     (b) Exchange  Procedures.  As soon as practicable after the Effective Time,
each holder of a certificate or  certificates  (which have not been cancelled or
retired) which prior thereto represented shares of ILCO Common Stock shall, upon
surrender to the Paying Agent of such certificate or certificates and acceptance
thereof by the Paying  Agent,  be entitled to a  certificate  representing  that
number of whole shares of FIC Common Stock which the aggregate  number of shares
of ILCO Common Stock previously  represented by such certificate or certificates
surrendered  shall have been  converted  into the right to receive  pursuant  to
Section 1.8 of this Agreement,  as the case may be, plus any cash to be received
in lieu of fractional shares, as provided in Section 1.11(f) below.

                                      -4-

<PAGE>


The Paying  Agent  shall  accept such  certificates  upon  compliance  with such
reasonable  terms and  conditions  as the  Paying  Agent may impose to effect an
orderly  exchange thereof in accordance with its normal exchange  practices.  If
the Merger  Consideration  (or any portion  thereof) is to be  delivered  to any
person  other  than the  person in whose name the  certificate  or  certificates
representing the shares of ILCO Common Stock surrendered in exchange therefor is
registered,  it shall be a condition to such  exchange that the  certificate  or
certificates so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person  requesting such exchange shall pay to the
Paying Agent any transfer or other Taxes (as defined in Section  2.16)  required
by  reason of the  payment  of such  consideration  to a person  other  than the
registered holder of the certificate(s)  surrendered,  or shall establish to the
satisfaction  of the  Paying  Agent  that  such  Tax  has  been  paid  or is not
applicable.  After the Effective Time, there shall be no further transfer on the
records of ILCO or its transfer  agent of  certificates  representing  shares of
ILCO Common  Stock,  and if such  certificates  are  presented to the  Surviving
Corporation,   they  shall  be   cancelled   against   delivery  of  the  Merger
Consideration as hereinabove provided. Until surrendered as contemplated by this
Section  1.11(b),  each  certificate  representing  shares of ILCO Common  Stock
(other than certificates representing Treasury Shares and FIC-Owned Shares to be
cancelled in accordance  with the terms of this  Agreement),  shall be deemed at
any time after the  Effective  Time to represent  only the right to receive upon
such  surrender  the Merger  Consideration  without  any  interest  thereon,  as
contemplated by Section 1.8.

     (c) Letter of  Transmittal.  Promptly  after the Effective  Time (but in no
event more than five  business  days  thereafter),  FIC shall require the Paying
Agent to mail to each record holder of certificates  that  immediately  prior to
the Effective  Time  represented  shares of ILCO Common  Stock,  which have been
converted  pursuant to Section 1.8, a form of letter of transmittal (which shall
specify that delivery shall be effected,  and risk of loss and title shall pass,
only upon proper  delivery of  certificates  representing  shares of ILCO Common
Stock  to the  Paying  Agent,  and  which  shall be in such  form and have  such
provisions  as  FIC  reasonably  may  specify)  and   instructions  for  use  in
surrendering such  certificates and receiving the Merger  Consideration to which
such holder shall be entitled therefor pursuant to Section 1.8.

     (d) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions  with  respect  to FIC Common  Stock with a record  date after the
Effective Time shall be paid to the holder of any certificate  that  immediately
prior to the Effective Time  represented  shares of ILCO Common Stock which have
been converted pursuant to Section 1.8, until the surrender for exchange of such
certificate in accordance with this Article I. Following  surrender for exchange
of any such certificate,  there shall be paid to the holder of such certificate,
without interest, (i) at the time of such surrender,  the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with  respect to the number of whole  shares of FIC Common  Stock into which the
shares of ILCO Common Stock represented by such certificate immediately prior to
the  Effective  Time were  converted  pursuant to Section  1.8,  and (ii) at the
appropriate  payment date, the amount of dividends or other distributions with a
record date after the Effective  Time, but prior to such  surrender,  and with a
payment date  subsequent to such  surrender,  payable with respect to such whole
shares of FIC Common Stock.

     (e)  No  Further   Ownership  Rights  in  ILCO  Common  Stock.  The  Merger
Consideration paid upon the surrender for exchange of certificates  representing
shares of ILCO Common Stock in accordance with the terms of this Article I shall
be  deemed to have  been  issued  and paid in full  satisfaction  of all  rights
pertaining to the shares of ILCO Common Stock  theretofore  represented  by such
certificates,  subject,  however,  to  FIC's  obligation  (if  any)  to pay  any
dividends  or make  any  other  distributions  with a record  date  prior to the
Effective Time which may have been declared by ILCO on the shares of ILCO Common
Stock in  accordance  with the terms of this  Agreement  or prior to the date of
this Agreement and which remain unpaid at the Effective Time.

                                      -5-

<PAGE>

     (f) No Fractional Shares. No certificates or scrip representing  fractional
shares of FIC Common  Stock shall be issued upon the  surrender  for exchange of
certificates that immediately prior to the Effective Time represented  shares of
ILCO Common  Stock which have been  converted  pursuant to Section 1.8, and such
fractional  share  interests  will not entitle the owner  thereof to vote or any
rights of a  shareholder  of FIC.  In lieu of any such  fractional  shares,  the
Paying Agent shall, on behalf of all holders of fractional  shares of FIC Common
Stock,  aggregate all such fractional interests  (collectively,  the "Fractional
Shares") and such  Fractional  Shares shall be sold by the Paying Agent as agent
for the holders of such Fractional  Shares at the then  prevailing  price on the
Nasdaq Stock Market's Small Cap Market, all in the manner provided herein. Until
the net proceeds of such sale or sales have been  distributed  to the holders of
Fractional  Shares, the Paying Agent shall retain such proceeds in trust for the
benefit of such holders as part of the Payment Fund. All  commissions,  transfer
Taxes and other out-of-pocket  transaction costs,  including reasonable expenses
and  compensation of the Paying Agent shall be charged against the proceeds from
the sale of the Fractional  Shares.  The sale of the Fractional  Shares shall be
executed on the Nasdaq  Stock  Market's  Small Cap Market or through one or more
member firms of the Nasdaq  Stock Market and will be executed in round lots,  to
the extent practicable.  The Paying Agent will determine the portion, if any, of
the net proceeds of such sale or sales to which each holder of Fractional Shares
is entitled, by multiplying the amount of the aggregate net proceeds of the sale
of the Fractional Shares by a fraction,  the numerator of which is the amount of
Fractional  Shares to which such holder is entitled and the denominator of which
is the aggregate amount of Fractional  Shares to which all holders of Fractional
Shares are entitled;  provided,  however, that in lieu of the foregoing,  at the
sole  option of FIC,  FIC may  instead  satisfy  payment  with  respect  to such
Fractional  Shares  by  delivering  to  the  Paying  Agent  reasonably  promptly
following the Effective  Time cash (without  interest) in an amount equal to the
aggregate amount of all such Fractional Shares multiplied by the average closing
price per share of FIC  Common  Stock on the  Nasdaq  Stock  Market's  Small Cap
Market for the thirty (30) trading days immediately prior to the Effective Time.

     (g)  Termination  of Payment  Fund.  Any portion of the Payment  Fund which
remains undistributed to the holders of certificates representing shares of ILCO
Common  Stock for 240 days after the  Effective  Time shall be delivered to FIC,
upon  demand,  and any  holders  of  shares  of ILCO  Common  Stock who have not
theretofore  complied with this Article I shall  thereafter look only to FIC and
only as general  creditors  thereof for  payment of their  claims for any Merger
Consideration  and any  dividends  or  distributions  with respect to FIC Common
Stock to which they are entitled pursuant to this Article I.

     (h) No Liability.  Neither the Surviving  Corporation  nor the Paying Agent
shall be liable to any  person in  respect  of any cash,  shares,  dividends  or
distributions  payable  from the Payment  Fund  delivered  to a public  official
pursuant to any applicable  abandoned  property,  escheat or similar law. If any
certificates  representing  shares  of ILCO  Common  Stock  shall  not have been
surrendered  prior to five years after the Effective Time (or immediately  prior
to such  earlier  date on which any  Merger  Consideration  in  respect  of such
certificate   would  otherwise   escheat  to  or  become  the  property  of  any
Governmental  Entity  (as  defined  in Section  2.3)),  any such  cash,  shares,
dividends or distributions  payable in respect of such certificate shall, to the
extent   permitted  by  applicable   law,   become  the  property  of  Surviving
Corporation,  free and clear of all claims or interest of any person  previously
entitled thereto.

                                      -6-

<PAGE>

     (i)  Withholding  of Tax. FIC shall be entitled to deduct and withhold from
the Merger  Consideration  otherwise  payable  pursuant to this Agreement to any
former holder of ILCO Common Stock such amount as FIC (or any affiliate thereof)
or the Paying  Agent is  required  to deduct and  withhold  with  respect to the
making of such payment under the Code or state, local or foreign Tax law. To the
extent  that  amounts are so withheld by FIC,  such  withheld  amounts  shall be
treated  for all  purposes of this  Agreement  as having been paid to the former
holder of ILCO Common Stock in respect of which such  deduction and  withholding
was made by FIC.

                                   ARTICLE II
                     REPRESENTATIONS AND WARRANTIES OF ILCO

     ILCO hereby represents and warrants to FIC and Merger Sub as follows:

     2.1  Organization,  Standing  and  Corporate  Power.  Each of ILCO  and its
subsidiaries  is a  corporation  duly  organized,  validly  existing and in good
standing under the laws of the jurisdiction in which it is organized and has the
requisite  corporate  power and  authority to carry on its business as now being
conducted.  Each of ILCO and its  subsidiaries  is duly qualified to do business
and is in good standing in each jurisdiction in which the nature of its business
or  the  ownership  or  leasing  of  its  properties  makes  such  qualification
necessary,  except where the failure to be so qualified  could not reasonably be
expected to have a material adverse effect on the business,  properties, results
of  operations,   or  condition   (financial  or  otherwise)  of  ILCO  and  its
subsidiaries,  considered as a whole (an "ILCO Material Adverse  Effect").  ILCO
has delivered or made available to FIC true,  correct and complete copies of its
Articles of Incorporation  and Bylaws, as amended to the date of this Agreement.
For  purposes of this  Agreement,  a  "subsidiary"  of any person shall mean any
other  entity  at  least  a  majority  of  the  equity  interests  in  which  is
beneficially owned, directly or indirectly, by the specified person.

     2.2 Capital Structure. (a) The authorized capital stock of ILCO consists of
(i)  15,000,000  shares  of ILCO  Common  Stock  and (ii)  30,000,000  shares of
preferred  stock,  par value  $1.00 per  share,  of which  5,000,000  shares are
designated as series A preferred  stock and 15,000,000  shares are designated as
series B preferred  stock. At the close of business on January 15, 2001, none of
such shares of  preferred  stock are issued and  outstanding,  5,000,000 of such
shares of series A  preferred  stock and  15,000,000  of such shares of series B
preferred  stock are held as treasury  shares by ILCO or a  subsidiary  of ILCO,
8,127,071  shares of ILCO  Common  Stock were  issued and  outstanding,  388,000
shares of ILCO Common Stock were  reserved  for issuance  pursuant to options to
purchase  ILCO Common  Stock  ("ILCO  Stock  Options")  which have been  granted
pursuant to the ILCO 1999  Employee  Stock  Option Plan (the "ILCO Stock  Option
Plan"),  and 2,732,407  shares of ILCO Common Stock were held as treasury shares
by ILCO or a  subsidiary  of ILCO.  Except as set forth  above,  at the close of
business  on  January  15,  2001,  no shares of  capital  stock or other  equity
securities  of  ILCO  were   authorized,   issued,   reserved  for  issuance  or
outstanding.  All  outstanding  shares of ILCO Common  Stock are, and all shares
which may be issued pursuant to the ILCO Stock Option Plan, or upon the exercise
of outstanding ILCO Stock Options will be, when issued, duly authorized, validly
issued,  fully paid and nonassessable and not subject to any preemptive  rights.
No bonds,  debentures,  notes or other indebtedness of ILCO or any subsidiary of
ILCO  having  the  right to vote (or  convertible  into,  or  exchangeable  for,
securities having the right to vote) on any matters on which the shareholders of
ILCO or any  subsidiary  of ILCO may vote are  issued  or  outstanding.

                                      -7-

<PAGE>

All the  outstanding  shares of capital stock or other equity  interests of each
subsidiary of ILCO have been validly issued and are fully paid and nonassessable
and are owned by ILCO, by one or more  wholly-owned  subsidiaries  of ILCO or by
ILCO and one or more  such  wholly-owned  subsidiaries,  free  and  clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "Liens"). Except as set forth above, neither
ILCO  nor  any  subsidiary  of  ILCO  has  any  outstanding   option,   warrant,
subscription  or other right,  agreement or commitment that either (i) obligates
ILCO or any subsidiary of ILCO to issue, sell or transfer, repurchase, redeem or
otherwise  acquire  or vote  any  shares  of the  capital  stock  of ILCO or any
subsidiary of ILCO or (ii)  restricts  the transfer of ILCO Common Stock.  Since
the close of business on January 15, 2001,  neither ILCO nor any  subsidiary  of
ILCO has issued any capital stock or securities or other rights convertible into
or exercisable  or  exchangeable  for shares of such capital  stock,  other than
shares of ILCO  Common  Stock  issued upon the  exercise  of ILCO Stock  Options
outstanding on January 15, 2001.

     (b) ILCO has good and marketable title to all of the issued and outstanding
shares of capital stock of each of its subsidiaries, in each case free and clear
of all Liens,  and ILCO has no  independent  assets,  operations or  liabilities
other  than  the   ownership   of  the  capital   stock  of  its   subsidiaries.
InterContinental  Growth Plans, Inc. has good and marketable title to all of the
outstanding capital stock of InterContinental  Life Agency, Inc., free and clear
of all Liens.

     2.3 Authority; Noncontravention. ILCO has the requisite corporate power and
authority  to enter into this  Agreement  and,  subject to the  approval  of its
shareholders as set forth in Section 5.2(a) with respect to the approval of this
Agreement (the "ILCO  Shareholders  Approval"),  to consummate the  transactions
contemplated by this Agreement.  The execution and delivery of this Agreement by
ILCO and the consummation by ILCO of the transactions  contemplated  hereby have
been duly  authorized  by all  necessary  corporate  action on the part of ILCO,
subject,  in the case of the Merger,  to the ILCO  Shareholders  Approval.  This
Agreement  has been duly  executed  and  delivered  by ILCO and,  assuming  this
Agreement  constitutes  the valid and binding  agreement  of FIC and Merger Sub,
constitutes a valid and binding  obligation of ILCO,  enforceable  against it in
accordance with its terms except that the enforcement  thereof may be limited by
(a) bankruptcy,  insolvency,  reorganization,  moratorium or similar laws now or
hereafter in effect relating to creditors' rights and remedies generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a  proceeding  at law or in  equity).  The  execution  and  delivery  of this
Agreement do not, and the consummation of the transactions  contemplated by this
Agreement and compliance with the provisions  hereof will not, (i) conflict with
any of the provisions of the Articles of  Incorporation or Bylaws of ILCO or the
comparable documents of any of its subsidiaries, (ii) except as set forth in the
ILCO Disclosure Letter and subject to the governmental filings and other matters
referred to in the following  sentence,  conflict with, result in a breach of or
default (with or without  notice or lapse of time, or both) under,  or give rise
to a right of  termination,  cancellation  or  acceleration of any obligation or
loss of a material  benefit  under,  or require the consent of any person under,
any indenture or other  agreement,  permit,  concession,  franchise,  license or
similar  instrument or undertaking to which ILCO or any of its subsidiaries is a
party or by which  ILCO or any of its  subsidiaries  or any of their  assets  is
bound  or  affected,  (iii)  result  in an  obligation  by ILCO,

                                      -8-

<PAGE>


the  Surviving  Corporation,  FIC, or any of their  respective  subsidiaries  to
redeem,  repurchase  or retire (or offer to redeem,  repurchase  or retire)  any
indebtedness  of  ILCO or any of its  subsidiaries  outstanding  as of the  date
hereof or equity security of ILCO or any of its  subsidiaries  outstanding as of
the date hereof,  or (iv) subject to the governmental  filings and other matters
referred to in the following sentence, contravene any law, rule or regulation of
any  state or of the  United  States or any  political  subdivision  thereof  or
therein,  or any order, writ,  judgment,  injunction,  decree,  determination or
award currently in effect,  except,  in the cases of the foregoing  clauses (ii)
through  (iv),  for  conflicts,   breaches,   defaults  or  other   consequences
(collectively,  "breaches")  that,  individually or in the aggregate,  could not
reasonably be expected to have an ILCO Material  Adverse Effect or to materially
hinder  ILCO's  ability to  consummate  the  transactions  contemplated  by this
Agreement.  No consent,  approval or authorization  of, or declaration or filing
with,  or  notice  to,  any  governmental  agency  or  regulatory  authority  (a
"Governmental  Entity")  which has not been  received or made, is required by or
with respect to ILCO or any of its subsidiaries in connection with the execution
and  delivery  of this  Agreement  by ILCO  or the  consummation  by ILCO of the
transactions  contemplated  hereby,  except  for (i)  the  filing  of  premerger
notification and report forms under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976,  as amended  (the "HSR  Act"),  with  respect to the Merger and the
termination or earlier  expiration of the applicable  waiting period thereunder,
(ii) the filing of appropriate  documents  with,  and, to the extent  necessary,
approval  of,  the  respective  Commissioners  of  Insurance  of the  States  of
Washington  and Indiana and such notices and  consents as may be required  under
the  insurance  laws of any  jurisdiction  in  which  ILCO,  FIC or any of their
respective  subsidiaries  is domiciled or does  business,  (iii) the Joint Proxy
Statement/Prospectus  to be  filed  with  the  SEC  by  ILCO  relating  to  ILCO
Shareholders Approval, (iv) the filing of such reports under the Exchange Act as
may  be  required  in  connection  with  this  Agreement  and  the  transactions
contemplated  by this  Agreement,  (v) the filing of the articles of merger with
the  Texas  Secretary  of State  and  appropriate  documents  with the  relevant
authorities of other states in which ILCO is qualified to do business, (vi) such
filings  and  consents  as may be required  under any  environmental,  health or
safety law or regulation pertaining to any notification,  disclosure or required
approval triggered by the Merger or the other transactions  contemplated by this
Agreement,  and  (vii)  such  filings  as may be  required  in  connection  with
statutory  provisions and regulations  relating to real property  transfer gains
Taxes and real property transfer Taxes.

     2.4 ILCO SEC Documents;  Financial  Statements.  (a) Since January 1, 1997,
ILCO and its subsidiaries have filed with the Securities and Exchange Commission
("SEC") all forms, reports,  schedules,  statements and other documents required
to be  filed by it with  the SEC  pursuant  to the  Securities  Act of 1933,  as
amended (the  "Securities  Act"),  and the  Securities  Exchange Act of 1934, as
amended (the "Exchange  Act") (any such documents filed prior to the date hereof
being  collectively  referred  to as the  "ILCO  SEC  Documents").  The ILCO SEC
Documents,  including the financial statements or schedules included therein, at
the time filed,  or in the case of registration  statements on their  respective
effective  dates,  (i) complied in all  material  respects  with the  applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
(ii) did not at the time filed (or in the case of  registration  statements,  at
the time of  effectiveness),  contain any untrue statement of a material fact or
omit to state a material  fact  required to be stated  therein or  necessary  in
order to make the statements made therein,  in light of the circumstances  under
which they were made, not misleading.  The financial  statements included in the
ILCO SEC Documents (the "Financial Statements"), (i) have been prepared from and
are in accordance with, the books and records of ILCO and its subsidiaries,

                                      -9-

<PAGE>

(ii)complied in all material  respects with applicable  accounting  requirements
and with the published  rules and  regulations of the SEC with respect  thereto,
(iii) have been  prepared  in  accordance  with  generally  accepted  accounting
principles  applied on a consistent  basis ("GAAP") during the periods  involved
and (iv) fairly present the consolidated financial position and the consolidated
results  of  operations  and cash flows of ILCO and its  subsidiaries  as of the
times and for the periods  referred to therein,  except that any such  Financial
Statements  that are  unaudited,  interim  financial  statements  are subject to
normal and recurring year-end adjustments.

     (b) ILCO has  previously  delivered  or made  available to FIC, in the form
filed with the SEC (including any amendments thereto), (i) its Annual Reports on
Form 10-K for each of the three fiscal years ended  December 31, 1999,  1998 and
1997,  (ii) all  definitive  proxy  statements  relating  to ILCO's  meetings of
shareholders  (whether  annual or special)  held since January 1, 1997 and (iii)
all other reports or  registration  statements  filed by ILCO with the SEC since
January 1, 1997.

     2.5 Absence of Certain  Changes or Events.  Except as disclosed in the ILCO
SEC  Documents or as disclosed in writing by ILCO to FIC in a disclosure  letter
(the "ILCO Disclosure  Letter"),  or as otherwise agreed to in writing after the
date hereof by FIC, or as expressly permitted by this Agreement,  since December
31, 1999,  ILCO and its  subsidiaries  have conducted their business only in the
ordinary course, and there has not been (a) any change which could reasonably be
expected to have an ILCO Material  Adverse Effect  (including as a result of the
consummation  of the  transactions  contemplated  by  this  Agreement),  (b) any
declaration,  setting  aside or payment of any  dividend  or other  distribution
(whether in cash,  stock or property) with respect to any of ILCO's  outstanding
capital  stock,  (c) any split,  combination or  reclassification  of any of its
outstanding  capital stock or any issuance or the  authorization of any issuance
of any other  securities in respect of, in lieu of or in substitution for shares
of its  outstanding  capital  stock,  (d) (i) any granting by ILCO or any of its
subsidiaries  to  any  director,   officer  or  other  employee  or  independent
contractor of ILCO or any of its subsidiaries of any increase in compensation or
acceleration of benefits,  except in the ordinary course of business  consistent
with prior practice or as was required under employment  agreements in effect on
December 31, 1999,  (ii) any granting by ILCO or any of its  subsidiaries to any
director,  officer or other employee or  independent  contractor of any increase
in, or acceleration of benefits in respect of,  severance or termination pay, or
pay in  connection  with any change of control of ILCO,  except in the  ordinary
course of business  consistent  with prior practice or as was required under any
employment,  severance or termination agreements in effect on December 31, 1999,
or (iii)  any  entry  by ILCO or any of its  subsidiaries  into any  employment,
severance,  change of control,  or  termination  or similar  agreement  with any
director,  executive  officer or other employee or independent  contractor other
than in the ordinary course of business  consistent with past practices,  or (e)
any change in accounting methods,  principles or practices by ILCO or any of its
subsidiaries  materially affecting its assets,  liabilities or business,  except
insofar as may have been required by a change in GAAP.

                                      -10-

<PAGE>

     2.6 No Extraordinary Payments or Change in Benefits. Except as set forth in
the ILCO Disclosure Letter, no current or former director,  officer, employee or
independent contractor of ILCO or any of its subsidiaries is entitled to receive
any  payment  under  any  agreement,  arrangement  or policy  (written  or oral)
relating  to  employment,  severance,  change  of  control,  termination,  stock
options, stock purchases,  compensation,  deferred compensation, fringe benefits
or other employee benefits currently in effect (collectively,  the "ILCO Benefit
Plans"),  nor will any  benefit  received  or to be  received  by any current or
former director,  officer,  employee or independent contractor of ILCO or any of
its  subsidiaries  under any ILCO Benefit Plan be accelerated or modified,  as a
result  of or  in  connection  with  the  execution  and  delivery  of,  or  the
consummation of the transactions contemplated by, this Agreement.

     2.7 Voting Requirements. The affirmative vote of at least two-thirds of the
outstanding  shares of ILCO Common  Stock  entitled to vote with  respect to the
approval of the Merger is the only vote of the holders of any class or series of
ILCO's capital stock  necessary to approve this  Agreement and the  transactions
contemplated by this Agreement.

     2.8 State Takeover  Statutes.  No state takeover statute or similar statute
or regulation applies or purports to apply to the Merger,  this Agreement or any
of the  transactions  contemplated  by this  Agreement  and no  provision of the
Articles of Incorporation,  Bylaws or other governing  instrument of ILCO or any
of its  subsidiaries  would,  directly  or  indirectly,  restrict  or impair the
ability of ILCO to consummate the transactions contemplated by this Agreement.

     2.9 Brokers.  Except as set forth in the ILCO Disclosure Letter, no broker,
finder or investment banker is entitled to any brokerage,  finder's or other fee
or commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of ILCO. A true,  correct and complete copy of
the engagement letter of P.W. Mattingly & Co. Inc. has been provided to FIC.

     2.10 Compliance with Applicable Laws. Each of ILCO and its subsidiaries has
in  effect  all  federal,  state,  local  and  foreign  governmental  approvals,
authorizations,  certificates,  filings, franchises,  licenses, notices, permits
and rights  (collectively,  "Permits") necessary for it to own, lease or operate
its properties  and assets and to carry on its business as now conducted,  other
than such  Permits  the  absence  of which  could  not,  individually  or in the
aggregate,  reasonably be expected to have an ILCO Material Adverse Effect,  and
there has  occurred no default  under any such Permit  other than such  defaults
which,  individually  or in the  aggregate,  could not reasonably be expected to
have  an  ILCO  Material  Adverse  Effect.  ILCO  and  its  subsidiaries  are in
compliance  with all applicable  statutes,  laws,  ordinances,  rules orders and
regulations  of any  Governmental  Entity,  including  without  limitation,  all
applicable  federal,  state and local  statutes and  regulations  regulating the
business  and  products  of  insurance,  except  for  such  noncompliance  which
individually  or in the  aggregate  could not  reasonably be expected to have an
ILCO Material Adverse Effect.

     2.11 Absence of Undisclosed  Liabilities.  Except for liabilities disclosed
in the  ILCO SEC  Documents,  liabilities  contemplated  by this  Agreement  and
liabilities set forth in the ILCO Disclosure  Letter,  ILCO and its subsidiaries
do not have any material  indebtedness,  obligations  or liabilities of any kind
(whether accrued, absolute,  contingent or otherwise) (a) required by GAAP to be
reflected  on  a  consolidated  balance  sheet  of  ILCO  and  its  consolidated
subsidiaries  or in the  notes,  exhibits  or  schedules  thereto  or (b)  which
reasonably could be expected to have an ILCO Material Adverse Effect.

                                      -11-

<PAGE>

     2.12  Litigation.  Except as disclosed in the ILCO SEC  Documents or as set
forth  in the  ILCO  Disclosure  Letter,  as of the  date  hereof,  there  is no
litigation,  administrative  action,  arbitration  or other  proceeding  pending
against ILCO or any of its subsidiaries or, to the knowledge of ILCO, threatened
that, individually or in the aggregate, could reasonably be expected to (a) have
an ILCO  Material  Adverse  Effect or (b) prevent,  or  significantly  delay the
consummation of the transactions  contemplated by this Agreement.  Except as set
forth  in the  ILCO  Disclosure  Letter,  as of the  date  hereof,  there  is no
judgment,  order,  injunction or decree of any Governmental  Entity  outstanding
against ILCO or any of its subsidiaries that,  individually or in the aggregate,
could  reasonably  be expected to have any effect  referred to in the  foregoing
clauses (a) and (b) of this Section 2.12.

     2.13 Transactions with Affiliates. Other than the transactions contemplated
by this Agreement,  or except to the extent  disclosed in the ILCO SEC Documents
or as set forth in the ILCO Disclosure Letter,  there have been no transactions,
agreements,  arrangements or understandings between ILCO or its subsidiaries, on
the one hand, and ILCO's  affiliates  (other than  subsidiaries  of ILCO) or any
other person,  on the other hand,  that would be required to be disclosed  under
Item 404 of Regulation S-K under the Securities Act.

     2.14 Labor Matters. Except as set forth in the ILCO SEC Documents or in the
ILCO Disclosure  Letter, (a) neither ILCO nor any of its subsidiaries is a party
to any labor or collective bargaining agreement, and no employees of ILCO or any
of its  subsidiaries  are  represented  by any  labor  organization,  (b) to the
knowledge  of  ILCO,  there  are no  material  representation  or  certification
proceedings,  or  petitions  seeking a  representation  proceeding,  pending  or
threatened to be brought or filed with the National Labor Relations Board or any
other labor  relations  tribunal or authority  and (c) to the knowledge of ILCO,
there  are  no  material  organizing  activities  involving  ILCO  or any of its
subsidiaries with respect to any group of employees of ILCO or its subsidiaries.

     2.15  Employee  Arrangements  and Benefit  Plans.  (a) ILCO has  previously
delivered or made  available to FIC (i) all ILCO Benefit  Plans,  including  all
employee  benefit  plans  within the  meaning of  Section  3(3) of the  Employee
Retirement  Income  Security  Act of 1974,  as amended  ("ERISA"),  and (ii) all
written    employment,    severance,    termination,    change-of-control,    or
indemnification  agreements (collectively,  the "Employment  Arrangements"),  in
each case under  which ILCO or any of its  subsidiaries  has any  obligation  or
liability (contingent or otherwise), except for any Employment Arrangement which
provides  for annual  compensation  (excluding  benefits)  of  $100,000 or less.
Except as set forth in the ILCO SEC Documents or in the ILCO  Disclosure  Letter
and  except  as could  not,  individually  or in the  aggregate,  reasonably  be
expected to have an ILCO Material Adverse Effect: (A) each ILCO Benefit Plan has
been  administered  and is in  compliance  with the  terms of such  plan and all
applicable laws, rules and regulations,  (B) no "reportable event" (as such term
is used in section 4043 of ERISA)  (other than those events for which the 30 day
notice has been waived pursuant to the  regulations),  "prohibited  transaction"
(as such term is used in section  406 of ERISA or  section  4975 of the Code) or
"accumulated funding deficiency" (as such term is used in section 412 or 4971 of
the Code) has heretofore  occurred with respect to any ILCO Benefit Plan and


                                      -12-

<PAGE>


(C)each ILCO Benefit Plan intended to qualify  under Section  401(a) of the Code
has received a favorable  determination  from the United States Internal Revenue
Service ("IRS")  regarding its qualified  status,  or remedial  amendment period
under  Section  401(b) of the Code will not have  expired  prior to the  Closing
Date,  and no  notice  has  been  received  from  the IRS  with  respect  to the
revocation of such qualification.

     (b) As of the date hereof,  there is no  litigation  or  administrative  or
other proceeding  involving any ILCO Benefit Plan or Employment  Arrangement nor
has  ILCO or any of its  subsidiaries  received  written  notice  that  any such
proceeding  is  threatened,  in each case where an adverse  determination  could
reasonably be expected to have an ILCO Material  Adverse  Effect.  Except as set
forth in the ILCO Disclosure  Letter,  neither ILCO nor any of its  subsidiaries
has contributed to any "multiemployer plan" (within the meaning of section 3(37)
of ERISA) and neither  ILCO nor any of its  subsidiaries  has  incurred,  nor is
reasonably likely to incur, any withdrawal liability under Section 4201 of ERISA
which  remains  unsatisfied  in an amount which could  reasonably be expected to
have an ILCO Material  Adverse Effect.  The termination of, or withdrawal  from,
any ILCO Benefit Plan or  multiemployer  plan to which ILCO or its  subsidiaries
contributes,  on or prior to the Closing  Date,  will not subject ILCO or any of
its  subsidiaries to any liability under Title IV of ERISA that could reasonably
be expected to have an ILCO Material Adverse Effect.

     2.16 Tax Matters.  ILCO and each of its subsidiaries  have timely filed (or
been  included in a  consolidated,  combined or unitary Tax Return that has been
timely  filed) with the  appropriate  Governmental  Entities  all  material  Tax
Returns (as defined below) required to be filed through the date hereof and will
timely file any such  material  Tax Returns  required to be filed on or prior to
the Closing Date (except those under valid  extension)  and all such Tax Returns
are and will be true and correct in all material respects.

     (b)  all  material  Taxes  (as  defined  below)  of  ILCO  and  each of its
subsidiaries  have been or will be timely  paid or  adequately  reserved  for in
accordance with GAAP in the Financial Statements.

     (c) ILCO and its subsidiaries  have complied in all material  respects with
all applicable laws, rules and regulations relating to the withholding of Taxes.

     (d) Except as set forth in the ILCO Disclosure Letter:

          (i) no  material  deficiencies  for  any  Taxes  have  been  proposed,
     asserted or assessed against ILCO or any of its subsidiaries  that have not
     been fully paid or  adequately  provided for in the  appropriate  financial
     statements of ILCO and its subsidiaries, and no material issues relating to
     Taxes have been  raised in writing by any  Governmental  Entity  during any
     presently pending audit or examination;


          (ii) ILCO and its  subsidiaries  are not now  subject  to audit by any
     Governmental  Entity and no waivers of statutes of limitation  with respect
     to the Tax Returns  have been given by or requested in writing from ILCO or
     any of its subsidiaries;

                                      -13-

<PAGE>


          (iii) there are no material  Liens for Taxes (other than for Taxes not
     yet due and payable) on any assets of ILCO or any of its subsidiaries;


          (iv) neither ILCO nor any of its  subsidiaries  is a party to or bound
     by (nor will any of them become a party to or bound by) any Tax  indemnity,
     Tax sharing, Tax allocation, or similar agreement,  arrangement or practice
     with respect to Taxes, except among themselves;

          (v) neither ILCO nor any of its subsidiaries has ever been a member of
     an affiliated  group of corporations  within the meaning of Section 1504 of
     the Code,  other  than the  affiliated  group of which  ILCO is the  common
     parent;

          (vi) neither ILCO nor any of its  subsidiaries has agreed to make, nor
     is any required to make, any adjustment under Section 481(a) of the Code or
     any similar provision of state,  local or foreign law by reason of a change
     in accounting method or otherwise;

          (vii)  neither  ILCO nor any of its  subsidiaries  has  received a Tax
     ruling from any Governmental  Entity,  or entered into a closing  agreement
     with any Governmental  Entity, that would have a continuing material effect
     after the Closing Date; and

          (viii)  neither  ILCO  nor any of its  subsidiaries  is a party to any
     contract,  agreement or other arrangement which would result in the payment
     of amounts that could be nondeductible by reason of Sections 280G or 162(m)
     of the Code.

     (e) No portion  of either  ILCO or any of its  subsidiaries  is or has ever
been, a "taxable  mortgage pool" as defined in Section  7701(i) of the Code.

     (f) For the taxable  period  ending on the  Closing  Date and for all prior
taxable   periods  for  which  the  statute  of  limitations  has  not  expired,
Investors-NA  and  Investors-IN  (i) qualifies (and  qualified) as an "insurance
company" within the meaning of Treasury  Regulation  Section  1.801-3(a)  (under
former  Section  801 of the Code) and as a life  insurance  company"  within the
meaning  of  Section  816(a) of the Code,  and (ii) are (and  were)  subject  to
taxation under Subchapter L of the Code.

     (g) The insurance  reserves and unearned  premiums with respect to ILCO and
each of its  subsidiaries set forth in all their federal Tax Returns as to which
the statute of  limitations  has not expired  were  determined  in all  material
respects in accordance with Section 807 of the Code.

     (h) The unpaid losses with respect to ILCO and each of its subsidiaries set
forth in all of their federal Tax Returns as to which the statute of limitations
has not expired were based upon  reasonable  estimations  and were discounted in
all material respects in accordance with Section 846 of the Code.

                                      -14-

<PAGE>

     (i) Each  life  insurance  policy  and  annuity  contract  issued,  sold or
administered  by  ILCO  or any  of its  subsidiaries,  at  all  relevant  times,
satisfied, and does satisfy, the requirements of, and/or has qualified, and does
qualify, under, Sections 72, 264, 401(a),403(a), 403(b), 817, 7702, 7702A of the
Code and the  Treasury  Regulations  thereunder,  as  applicable,  except to the
extent that failures to satisfy or qualify in the aggregate,  were such failures
tripled, would not result in any ILCO Material Adverse Effect.

     (j)  ILCO has not  constituted  either a  "distributing  corporation"  or a
"controlled  corporation"  (within  the meaning of Section  355(a)(1)(A)  of the
Code) in a distribution of stock qualifying for tax-free treatment under Section
355 of the Code (i) in the two years prior to the date of this Agreement or (ii)
in a distribution  which could otherwise  constitute part of a "plan" or "series
of related  transactions"  (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.

     (k) Neither  ILCO nor any of its  subsidiaries  knows of any fact,  plan or
circumstance  that is reasonably likely to prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code.

     As used in this  Agreement,  "Tax  Return"  shall mean any return,  report,
claim for refund,  estimate,  information  return or statement or other  similar
document  relating to or required to be filed with any Governmental  Entity with
respect to Taxes,  including any schedule or attachment  thereto,  and including
any amendment  thereof.  As used in this Agreement,  "Taxes" shall mean taxes of
any kind,  including  but not  limited to those  measured  by or  referred to as
income,  franchise,  gross receipts,  sales, use, ad valorem,  profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
value added,  property or windfall  profits  taxes,  customs,  duties or similar
fees, assessments or charges of any kind whatsoever,  together with any interest
and  any  penalties,  additions  to tax or  additional  amounts  imposed  by any
Governmental  Entity,  domestic or foreign and shall  include any  transferee or
successor  liability in respect of Taxes  (whether by contract or otherwise) and
any several liability in respect of any Tax as a result of being a member of any
affiliated, consolidated, combined, unitary or similar group.

     2.17  Intellectual  Property.  Except as set  forth in the ILCO  Disclosure
Letter and except to the extent of any  inaccuracy  of any of the  following (or
the circumstances giving rise to such inaccuracy) which,  individually or in the
aggregate,  could not  reasonably be expected to have an ILCO  Material  Adverse
Effect:  (a) ILCO and each of its  subsidiaries  owns, or is licensed to use (in
each case, free and clear of any Liens),  all Intellectual  Property (as defined
below)  used in or  necessary  for the  conduct  of its  business  as  currently
conducted; (b) the use of any Intellectual Property by ILCO and its subsidiaries
does not  infringe  on or  otherwise  violate the rights of any person and is in
accordance with any applicable  license pursuant to which ILCO or any subsidiary
acquired the right to use any  Intellectual  Property;  (c) to the  knowledge of
ILCO, no person is challenging,  infringing on or otherwise  violating any right
of ILCO or any of its  subsidiaries  with respect to any  Intellectual  Property
owned by and/or licensed to ILCO or its  subsidiaries;  and

                                      -15-

<PAGE>

(d) neither ILCO nor any of its  subsidiaries has received any written notice of
any pending claim with respect to any Intellectual Property used by ILCO and its
subsidiaries and to its knowledge no Intellectual Property owned and/or licensed
by ILCO or its  subsidiaries  is being used or  enforced  in a manner that would
result in the abandonment, cancellation or unenforceability of such Intellectual
Property.


     For  purposes  of  this  Agreement,   "Intellectual  Property"  shall  mean
trademarks,  service marks,  brand names and other  indications  of origin,  the
goodwill associated with the foregoing and registrations in any jurisdiction of,
and applications in any jurisdiction to register,  the foregoing,  including any
extension,  modification  or renewal of any such  registration  or  application;
inventions,   discoveries  and  ideas,   whether   patentable  or  not,  in  any
jurisdiction;  patents, applications for patents (including, without limitation,
divisions,  continuations,  continuations in part and renewal applications), and
any renewals,  extensions or reissues thereof,  in any  jurisdiction;  nonpublic
information,  trade  secrets  and  confidential  information  and  rights in any
jurisdiction to limit the use or disclosure thereof by any person;  writings and
other works, whether copyrightable or not, in any jurisdiction; registrations or
applications  for  registration  of  copyrights  in any  jurisdiction,  and  any
renewals or extensions thereof; any similar intellectual property or proprietary
rights;  and any claims or causes of action  arising  out of or  relating to any
infringement or misappropriation of any of the foregoing.

     2.18 Environmental  Matters.  Except as disclosed in the ILCO SEC Documents
or as set forth in the ILCO Disclosure Letter and except as could not reasonably
be expected to have an ILCO Material Adverse Effect:  (a) the operations of ILCO
and its subsidiaries have been and are in compliance with all Environmental Laws
(as defined  below) and with all Permits  required by  Environmental  Laws,  (b)
there are no pending or, to the knowledge of ILCO, threatened,  actions,  suits,
claims,  investigations or other proceedings (collectively,  "Actions") under or
pursuant to Environmental Laws against ILCO or its subsidiaries or involving any
real property currently or, to the knowledge of ILCO,  formerly owned,  operated
or leased by ILCO or its  subsidiaries,  (c) ILCO and its  subsidiaries  are not
subject  to any  Environmental  Liabilities  (as  defined  below),  and,  to the
knowledge of ILCO, no facts,  circumstances  or conditions  relating to, arising
from,  associated with or attributable to any real property currently or, to the
knowledge  of  ILCO,  formerly  owned,   operated  or  leased  by  ILCO  or  its
subsidiaries or operations  thereon that could  reasonably be expected to result
in Environmental Liabilities,  (d) all real property owned and, to the knowledge
of ILCO,  all real property  operated or leased by ILCO or its  subsidiaries  is
free of contamination  from Hazardous  Material (as defined below) and (e) there
is not now, nor, to the knowledge of ILCO, has there been in the past, on, in or
under  any  real  property  owned,  leased  or  operated  by  ILCO or any of its
predecessors  (i) any  underground  storage tanks,  above- ground storage tanks,
dikes  or  impoundments  containing  Hazardous  Materials,  (ii)  any  asbestos-
containing  materials,   (iii)  any  polychlorinated   biphenyls,  or  (iv)  any
radioactive substances.

     As used in this Agreement,  "Environmental Laws" means any and all federal,
state,  local  or  municipal  laws,  rules,   orders,   regulations,   statutes,
ordinances, codes, decisions,  injunctions, orders, decrees, requirements of any
Governmental  Entity,  any and all common law  requirements,  rules and bases of
liability regulating,  relating to or imposing liability or standards of conduct
concerning  pollution,  Hazardous Materials or protection of human health or the
environment,  as  currently in effect and  includes,  but is not limited to, the
Comprehensive Environmental Response,  Compensation and Liability Act, 42 U.S.C.
9601 et seq., the Hazardous Materials Transportation Act 49 U.S.C. 1801 et seq.,
the Resource  Conservation  and Recovery Act, 42 U.S.C.  6901 et seq., the Clean
Water Act, 33 U.S.C.  1251 et seq.,  the Clean Air Act, 33 U.S.C.  2601 et seq.,

                                      -16-

<PAGE>


the  Toxic  Substances  Control  Act,  15  U.S.C.  2601  et  seq.,  the  Federal
Insecticide,  Fungicide and Rodenticide Act, 7 U.S.C.,  136 et seq., and the Oil
Pollution Act of 1990, 33 U.S.C. 2701 et seq., as such laws have been amended or
supplemented,   and  the  regulations  promulgated  pursuant  thereto,  and  all
analogous  state or local statutes.  As used in this  Agreement,  "Environmental
Liabilities"  with  respect to any person  means any and all  liabilities  of or
relating to such person or any of its  subsidiaries  (including any entity which
is,  in  whole  or in  part,  a  predecessor  of  such  person  or any  of  such
subsidiaries),  whether  vested or  unvested,  contingent  or  fixed,  actual or
potential,  known or unknown, which (i) arise under or relate to matters covered
by  Environmental  Laws and (ii)  relate  to  actions  occurring  or  conditions
existing on or prior to the Closing Date. As used in this Agreement,  "Hazardous
Materials"  means  any  hazardous  or toxic  substances,  materials  or  wastes,
defined,  listed,  classified or regulated as such in or under any Environmental
Laws which  includes,  but is not limited  to,  petroleum,  petroleum  products,
friable asbestos, urea formaldehyde and polychlorinated biphenyls.

     2.19  Material  Contracts.  (a) Except as set forth in the ILCO  Disclosure
Letter,  all contracts  and  agreements  of ILCO and its  subsidiaries  that are
required to be  described  in the ILCO SEC  Documents or to be filed as exhibits
thereto are  described in the ILCO SEC  Documents  or filed as exhibits  thereto
("Material Contracts"), respectively, and are in full force and effect and, upon
consummation of the  transactions  contemplated  hereby,  shall continue in full
force and effect without penalty, acceleration, termination, repurchase right or
other adverse  consequence.  ILCO has previously  delivered or made available to
FIC, true, correct and complete copies of all such Material  Contracts.  Neither
ILCO nor any of its subsidiaries,  nor to the knowledge of ILCO, any other party
is in breach of or in default under any such Material  Contract and no event has
occurred  that  with the lapse of time or the  giving  of  notice or both  would
constitute a default  thereunder by ILCO or, to the knowledge of ILCO, any other
party thereto,  in any such case in which such default or event could reasonably
be  expected  to have an ILCO  Material  Adverse  Effect.  Neither  ILCO nor any
subsidiary of ILCO has received any written  notice (or to the knowledge of ILCO
any other notice) of default or termination under any Material Contract,  and to
the  knowledge of ILCO,  there  exists no basis for any  assertion of a right of
default or termination under such Material Contracts.

     2.20 Tangible Property.  All of the assets of ILCO and its subsidiaries are
in good operating  condition,  reasonable wear and tear excepted,  and usable in
the  ordinary  course  of  business,  except  where  the  failure  to be in such
condition or so usable could not,  individually or in the aggregate,  reasonably
be expected to have an ILCO Material Adverse Effect.

     2.21 Fairness  Opinion.  The special committee of ILCO's Board of Directors
(the "ILCO Special  Committee") has received an opinion of P.W.  Mattingly & Co.
Inc.,  financial  advisor to the ILCO  Special  Committee,  (the "ILCO  Fairness
Opinion"),  to the effect  that the Merger is fair,  from a  financial  point of
view, to the shareholders of ILCO.

                                      -17-

<PAGE>


     2.22 Insurance Business.

     (a)  Except as  otherwise  could  not,  individually  or in the  aggregate,
reasonably be expected to have an ILCO Material  Adverse  Effect,  all policies,
binders, slips, certificates,  guaranteed insurance contracts, annuity contracts
and  participation  agreements  and  other  agreements  of  insurance,   whether
individual  or  group,   in  effect  as  of  the  date  hereof   (including  all
applications,  supplements,  endorsements,  riders and  ancillary  agreements in
connection therewith) that are issued by Investors Life Company of North America
("Investors-NA") and Investors Life Insurance Company of Indiana ("Investors-IN"
and,  collectively  with Investors- NA, the "ILCO  Insurance  Companies") or any
predecessor  of  the  ILCO  Insurance  Companies,  and  any  and  all  marketing
materials,  are, to the extent required under  applicable law, on forms approved
by applicable insurance regulatory  authorities or which have been filed and not
objected to by such  authorities  within the period provided for objection,  and
such forms and  marketing  materials  comply in all material  respects  with the
insurance statutes, regulations and rules applicable thereto.

     (b)  ILCO  has  delivered  or made  available  to FIC a true,  correct  and
complete copy of all actuarial  reports  prepared by ILCO's  actuaries,  and any
actuarial  reports prepared by other actuaries,  independent or otherwise,  with
respect  to  any  ILCO  Insurance   Company  since  January  1,  1998,  and  all
attachments, addenda, supplements and modifications thereto (the "ILCO Actuarial
Analyses"). To the knowledge of ILCO, the information and data furnished by ILCO
or any ILCO Insurance  Company to its  independent  actuaries in connection with
the  preparation  of the ILCO  Actuarial  Analyses were accurate in all material
respects.  Furthermore,  each ILCO Actuarial Analysis was based upon an accurate
inventory of policies in force for the ILCO Insurance Companies, at the relevant
time  of  preparation,   was  prepared  using  appropriate  modeling  procedures
accurately applied and in conformity with generally accepted actuarial standards
consistently  applied,  and the  projections  contained  therein  were  properly
prepared in accordance with the assumptions stated therein.

     (c) To the  knowledge of ILCO,  except as set forth in the ILCO  Disclosure
Letter or as reserved for or disclosed  in the ILCO SEC  Documents,  or as could
not,  individually  or in the aggregate,  reasonably be expected to have an ILCO
Material Adverse Effect, all amounts recoverable under reinsurance,  coinsurance
or other  similar  contracts  to which  any ILCO  Insurance  Company  is a party
(including,  but not limited to,  amounts  based on paid and unpaid  losses) are
fully collectible.

     (d) ILCO has delivered or made available to FIC true,  correct and complete
copies of all  analyses,  reports  and other data  prepared  by ILCO or any ILCO
Insurance  Company or  submitted  by ILCO or any ILCO  Insurance  Company to any
insurance regulatory authority or received by ILCO or any ILCO Insurance Company
relating to risk-based  capital  calculations  or IRIS ratios of the years ended
December 31, 1999 and 1998.

     (e)  ILCO  has  delivered  or made  available  to FIC a true,  correct  and
complete  list on a per  risk and  aggregate  basis  of the  maximum  underlying
retentions (net of all reinsurance  maintained) on all insurance and reinsurance
policies  written or entered into by any ILCO  Insurance  Company since December
31, 1999.

     (f) Except as could not,  individually  or in the aggregate,  reasonably be
expected to have an ILCO Material Adverse Effect, all annuity contracts and life
insurance  policies issued by an ILCO Insurance Company meet all definitional or
other  requirements  for  qualification  under the Code section  applicable  (or
intended to be applicable) to such annuity contracts or life insurance policies.

                                      -18-

<PAGE>

     (g) Except as set forth the ILCO Disclosure  Letter,  there are no material
"hold harmless"  indemnification  agreements respecting the Tax qualification or
treatment of any product or plan sold,  issued,  entered into or administered by
the ILCO  Insurance  Companies,  and there have been no claims  asserted  by any
person under such "hold harmless" indemnification agreements.

     2.23 Liabilities and Reserves.

     (a) Except as set forth in the ILCO Disclosure Letter, the reserves carried
on the  books  of each  ILCO  Insurance  Company  for  future  insurance  policy
benefits,  losses,  claims and similar purposes were, as of the respective dates
of such ILCO financial  statements  required to be submitted to the  appropriate
regulatory  authorities  of  the  jurisdictions  in  which  the  ILCO  Insurance
Companies  are domiciled on forms  prescribed or permitted by such  authority in
compliance  in  all  material   respects  with  the  requirements  for  reserves
established  by the insurance  departments of the state of domicile of such ILCO
Insurance  Company,  were determined in all material respects in accordance with
generally accepted actuarial  standards  consistently  applied,  and were fairly
stated in all material respects in accordance with sound actuarial and statutory
accounting principles. ILCO has delivered or made available to FIC true, correct
and  complete  copies  of the  Annual  Statements  delivered  to  the  insurance
department of the domiciliary state of each ILCO Insurance Company for the years
ended  December 31, 1999 and 1998.  ILCO has delivered or made  available to FIC
copies of all work papers used as the basis for  establishing  the  reserves for
the ILCO  Insurance  Companies  at December  31,  1999 and  December  31,  1998,
respectively,  as well as all  reports  with  respect  to the  adequacy  of such
reserves.

     (b) Except for  regular  periodic  assessments  in the  ordinary  course of
business or as reserved for or disclosed in the ILCO SEC Documents,  no claim or
assessment is pending nor, to the knowledge of ILCO, threatened against any ILCO
Insurance  Company by any state  insurance  guaranty  associations in connection
with such  association's fund relating to insolvent insurers which if determined
adversely,  could,  individually or in the aggregate,  reasonably be expected to
have an ILCO Material Adverse Effect.

     2.24 ILCO Broker/Dealers.

     (a) ILCO  operates its  broker/dealer  operations  exclusively  through ILG
Securities  Corporation (the "ILCO  Broker/Dealer").  The ILCO  Broker/Dealer is
registered as a broker-dealer with the SEC and has been since January 1, 1997 in
full compliance with all applicable laws, except for any failures to register or
comply which could not, individually or in the aggregate, reasonably be expected
to have an ILCO Material  Adverse  Effect.  The ILCO  Broker/Dealer  is a member
organization in good standing of the National Association of Securities Dealers,
Inc.  except such failures to be in good standing which could not,  individually
or in the  aggregate,  reasonably be expected to have an ILCO  Material  Adverse
Effect.

                                      -19-

<PAGE>

     (b) Except as could not,  individually  or in the aggregate,  reasonably be
expected to have an ILCO Material Adverse Effect, the ILCO Broker/Dealer is not,
nor is any "associated person" of it, subject to a "statutory  disqualification"
(as such terms are defined in the Exchange Act) or subject to a disqualification
that would be a basis for censure,  limitations on the activities,  functions or
operations  of, or  suspension or  revocation  of the  registration  of the ILCO
Broker Dealer as  broker-dealer  under Section 15, Section 15B or Section 15C of
the  Exchange  Act  and,  to  ILCO's  knowledge,  there  are no  proceedings  or
investigations   pending   by  any   Governmental   Entity  or   self-regulatory
organization   that  is  reasonably  likely  to  result  in  any  such  censure,
limitations, suspension or revocation.

     (c) Except as could not,  individually  or in the aggregate,  reasonably be
expected to have an ILCO Material Adverse Effect, since its inception,  the ILCO
Broker/Dealer  has had net capital (as such term is defined in Rule 15c3-1 under
the Exchange  Act) that  satisfies the minimum net capital  requirements  of the
Exchange Act.

                                  ARTICLE III
                     REPRESENTATIONS AND WARRANTIES OF FIC

     FIC represents and warrants to ILCO as follows:

     3.1  Organization,  Standing  and  Corporate  Power.  Each  of FIC  and its
subsidiaries  is a  corporation  duly  organized,  validly  existing and in good
standing under the laws of the  jurisdiction in which it is incorporated and has
the  requisite  corporate  power and  authority  to carry on its business as now
being  conducted.  Each of FIC  and its  subsidiaries  is duly  qualified  to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such  qualification
necessary,  except where the failure to be so qualified  could not reasonably be
expected to have a material adverse effect on the business,  properties, results
of   operations,   or  condition   (financial  or  otherwise)  of  FIC  and  its
subsidiaries,  considered as a whole (an "FIC Material Adverse Effect"). FIC has
previously delivered or made available to ILCO true, correct and complete copies
of its  Articles of  Incorporation  and  Bylaws,  as amended to the date of this
Agreement.

     3.2 Capital  Structure.  The  authorized  capital  stock of FIC consists of
10,000,000  shares of FIC Common Stock.  At the close of business on January 15,
2001, 5,054,661 shares of FIC Common Stock were issued and outstanding,  500,411
shares of FIC Common Stock were  reserved for issuance  pursuant to  outstanding
options or  warrants  to purchase  FIC Common  Stock which have been  granted to
Investors-NA ("FIC Stock Options"),  and 790,639 shares of FIC Common Stock were
held as  treasury  shares  by FIC or a  subsidiary  of FIC.  Except as set forth
above,  at the close of business on January 15, 2001, no shares of capital stock
or other equity securities of FIC were authorized, issued, reserved for issuance
or  outstanding.  All  outstanding  shares of capital  stock of FIC are, and all
shares which may be issued  pursuant to FIC's stock option plans,  as amended to
the date hereof,  or upon the exercise of outstanding FIC Stock Options will be,
when issued, duly authorized,  validly issued,  fully paid and nonassessable and
not  subject to any  preemptive  rights.  No bonds,  debentures,  notes or other
indebtedness  of FIC or any  subsidiary  of FIC  having  the  right  to vote (or
convertible into, or exchangeable  for,  securities having the right to vote) on
any matters on which the  shareholders  of FIC or any subsidiary of FIC may vote
are issued or outstanding.  All the outstanding  shares of capital stock of each
subsidiary of FIC have been validly issued and are fully paid and  nonassessable
and are owned by FIC, by one or more wholly-owned  subsidiaries of FIC or by FIC
and one or more such  wholly-owned  subsidiaries,  free and clear of all  Liens,


                                      -20-

<PAGE>

except for Liens that, individually or in the aggregate, could not reasonably be
expected to have an FIC  Material  Adverse  Effect.  Except as set forth  above,
neither  FIC nor any  subsidiary  of FIC has any  outstanding  option,  warrant,
subscription  or other right,  agreement or commitment that either (i) obligates
FIC or any subsidiary of FIC to issue, sell or transfer,  repurchase,  redeem or
otherwise  acquire or vote any shares of the capital  stock of FIC or any of its
subsidiaries or (ii) restricts the transfer of FIC Common Stock. Since the close
of business  on January 15,  2001,  neither  FIC nor any  subsidiary  of FIC has
issued any capital  stock or  securities  or other  rights  convertible  into or
exercisable or exchangeable for shares of such capital stock,  other than shares
of FIC Common Stock issued upon the exercise of FIC Stock Options outstanding on
January 15, 2001.

     (b) FIC has good and marketable  title to all of the issued and outstanding
shares of capital stock of each of its subsidiaries, in each case free and clear
of all Liens, and FIC has no independent assets, operations or liabilities other
than the ownership of the capital stock of its subsidiaries.

     3.3 Authority;  Noncontravention. FIC has the requisite corporate power and
authority  to enter into this  Agreement  and,  subject to the  approval  of its
shareholders  as set forth in Section 5.2(b) with respect to the approval of (i)
the issuance of shares of FIC Common Stock  contemplated  by this  Agreement and
(ii) the Charter Amendment (the "FIC Shareholders Approval"),  to consummate the
transactions  contemplated by this Agreement. The execution and delivery of this
Agreement by FIC and the  consummation by FIC of the  transactions  contemplated
hereby have been duly authorized by all necessary  corporate  action on the part
of FIC,  subject,  in the case of the  issuance of shares of FIC Common Stock in
the Merger and the Charter  Amendment,  to the FIC Shareholders  Approval.  This
Agreement  has been  duly  executed  and  delivered  by FIC and,  assuming  this
Agreement  constitutes  the valid and binding  agreement of ILCO,  constitutes a
valid and binding obligation of FIC,  enforceable  against it in accordance with
its terms except that the enforcement  thereof may be limited by (a) bankruptcy,
insolvency,  reorganization,  moratorium  or similar  laws now or  hereafter  in
effect  relating to  creditors'  rights and remedies  generally  and (b) general
principles of equity  (regardless of whether  enforceability  is considered in a
proceeding at law or in equity). The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated by this Agreement and
compliance  with the  provisions  hereof will not, (i) conflict  with any of the
provisions of the Articles of  Incorporation  or Bylaws of FIC or the comparable
documents  of any  subsidiary  of  FIC,  (ii)  except  as set  forth  in the FIC
Disclosure  Letter (as  defined  below in Section 3.5 hereof) and subject to the
governmental  filings and other matters  referred to in the following  sentence,
conflict with, result in a breach of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration  of any obligation or loss of a material  benefit under, or require
the consent of any person  under,  any  indenture  or other  agreement,  permit,
concession, franchise, license or similar instrument or undertaking to which FIC
or any of its subsidiaries is a party or by which FIC or any of its subsidiaries
or any of their assets is bound or affected,  (iii) result in an  obligation  by
FIC or any of its  subsidiaries  to  redeem,  repurchase  or retire (or offer to
redeem, repurchase or retire) any indebtedness of FIC or any of its subsidiaries
outstanding  as of the  date  hereof  or  equity  security  of FIC or any of its
subsidiaries  outstanding  as of  the  date  hereof,  or  (iv)  subject  to  the
governmental  filings and other matters  referred to in the following  sentence,
contravene  any law,  rule or regulation of any state or of the United States or
any political  subdivision  thereof or therein,  or any order,  writ,  judgment,
injunction,  decree,  determination or award currently in effect, except, in the
cases  of  the  foregoing   clauses  (ii)  through  (iv),   for  breaches  that,

                                      -21-

<PAGE>



     individually or in the aggregate,  could not reasonably be expected to have
an FIC  Material  Adverse  Effect  or to  materially  hinder  FIC's  ability  to
consummate the transactions contemplated by this Agreement. No consent, approval
or  authorization  of,  or  declaration  or  filing  with,  or  notice  to,  any
Governmental  Entity which has not been received or made, is required by or with
respect to FIC or any of its  subsidiaries  in connection with the execution and
delivery of this Agreement by FIC or the consummation by FIC of the transactions
contemplated  hereby,  except for (i) the filing of premerger  notification  and
report forms under the HSR Act with respect to the Merger and the termination or
earlier expiration of the applicable waiting period thereunder,  (ii) the filing
of appropriate  documents with, and, to the extent  necessary,  approval of, the
respective  Commissioners  of Insurance of the States of Washington  and Indiana
and such notices and consents as may be required under the insurance laws of any
jurisdiction  in which  ILCO,  FIC or any of their  respective  subsidiaries  is
domiciled or does business,  (iii) the filing of a registration  statement under
the  Securities  Act and any other  filings  required by any state blue sky laws
with respect to the  issuance of shares of FIC Common Stock in the Merger,  (iv)
the Joint Proxy  Statement/Prospectus (as defined in Section 5.1(a)) to be filed
with the SEC by FIC relating to the FIC  Shareholders  Approval,  (v) any filing
required by the Nasdaq  Stock  Market with  respect to the issuance of shares of
FIC Common Stock in the Merger and upon  exercise of Assumed  Stock  Options (as
defined in Section  6.3(a)),  (vi) the filing of such reports under the Exchange
Act as may be required in connection  with this  Agreement and the  transactions
contemplated  by this  Agreement,  (vii) such  filings  and  consents  as may be
required under any environmental,  health or safety law or regulation pertaining
to any notification,  disclosure or required approval triggered by the Merger or
the other transactions  contemplated by this Agreement,  and (viii) such filings
as may be required in  connection  with  statutory  provisions  and  regulations
relating to real property transfer gains Taxes and real property transfer Taxes.

     3.4 FIC SEC Documents.  (a) Since January 1, 1997, FIC and its subsidiaries
have filed  with the SEC all forms,  reports,  schedules,  statements  and other
documents required to be filed by it with the SEC pursuant to the Securities Act
and the  Exchange Act (any such  documents  filed prior to the date hereof being
collectively  referred to as the "FIC SEC  Documents").  The FIC SEC  Documents,
including the financial  statements or schedules  included therein,  at the time
filed, or in the case of registration  statements on their respective  effective
dates, (i) complied in all material respects with the applicable requirements of
the Exchange Act and the Securities Act, as the case may be, and (ii) did not at
the  time  filed  (or in the  case of  registration  statements,  at the time of
effectiveness), contain any untrue statement of a material fact or omit to state
a material fact required to be stated  therein or necessary in order to make the
statements  made therein,  in light of the  circumstances  under which they were
made, not misleading. The financial statements included in the FIC SEC Documents
(the  "FIC  Financial  Statements"),  (i)  have  been  prepared  from and are in
accordance  with,  the  books  and  records  of FIC and its  subsidiaries,  (ii)
complied in all material  respects with applicable  accounting  requirements and
with the published rules and regulations of the SEC with respect thereto,  (iii)
have been prepared in accordance with GAAP during the periods  involved and (iv)
fairly present the consolidated  financial position and the consolidated results
of operations and cash flows of FIC and its subsidiaries as of the times and for
the periods referred to therein,  except that any such FIC Financial  Statements
that are  unaudited,  interim  financial  statements  are  subject to normal and
recurring year-end adjustments.

                                      -22-

<PAGE>


     (b) FIC has  previously  delivered or made  available to ILCO,  in the form
filed with the SEC (including any amendments thereto), (i) its Annual Reports on
Form 10-K for each of the three fiscal years ended  December 31, 1999,  1998 and
1997,  (ii) all  definitive  proxy  statements  relating  to FIC's  meetings  of
shareholders  (whether  annual or special)  held since January 1, 1997 and (iii)
all other  reports or  registration  statements  filed by FIC with the SEC since
January 1, 1997.

     3.5 Absence of Certain  Changes or Events.  Except as  disclosed in the FIC
SEC  Documents or as disclosed in writing by FIC to ILCO in a disclosure  letter
(the "FIC Disclosure  Letter"),  or as otherwise  agreed to in writing after the
date hereof by ILCO, or as expressly permitted by this Agreement, since December
31, 1999, FIC and its  subsidiaries  have  conducted  their business only in the
ordinary course, and there has not been (a) any change which could reasonably be
expected to have an FIC Material  Adverse  Effect  (including as a result of the
consummation  of the  transactions  contemplated  by  this  Agreement),  (b) any
declaration,  setting  aside or payment of any  dividend  or other  distribution
(whether in cash,  stock or  property)  with  respect to any of FIC's  currently
outstanding capital stock, (c) any split, combination or reclassification of any
of its  outstanding  capital stock or any issuance or the  authorization  of any
issuance of any other  securities  in respect of, in lieu of or in  substitution
for shares of its outstanding  capital stock, (d) (i) any granting by FIC or any
of its  subsidiaries  to any director,  officer or other employee or independent
contractor of FIC or any of its  subsidiaries of any increase in compensation or
acceleration of benefits,  except in the ordinary course of business  consistent
with prior practice or as was required under employment  agreements in effect on
December 31, 1999,  (ii) any granting by FIC or any of its  subsidiaries  to any
director,  officer or other employee or  independent  contractor of any increase
in, or acceleration of benefits in respect of,  severance or termination pay, or
pay in  connection  with any change of control  of FIC,  except in the  ordinary
course of business  consistent  with prior practice or as was required under any
employment,  severance or termination  agreements in effect on December 31, 1999
or (iii)  any  entry  by FIC or any of its  subsidiaries  into  any  employment,
severance,  change of control,  or  termination  or similar  agreement  with any
director,  executive  officer or other employee or independent  contractor other
than in the ordinary course of business  consistent with past practices,  or (e)
any change in accounting  methods,  principles or practices by FIC or any of its
subsidiaries  materially affecting its assets,  liabilities or business,  except
insofar as may have been required by a change in GAAP.

     3.6 No Extraordinary Payments or Change in Benefits. Except as disclosed in
the FIC Disclosure Letter, no current or former director,  officer,  employee or
independent  contractor of FIC or any of its subsidiaries is entitled to receive
any  payment  under  any  agreement,  arrangement  or policy  (written  or oral)
relating  to  employment,  severance,  change  of  control,  termination,  stock
options, stock purchases,  compensation,  deferred compensation, fringe benefits
or other employee benefits currently in effect  (collectively,  the "FIC Benefit
Plans"),  nor will any  benefit  received  or to be  received  by any current or
former director,  officer,  employee or independent  contractor of FIC or any of
its  subsidiaries  under any FIC Benefit Plan be accelerated  or modified,  as a
result  of or  in  connection  with  the  execution  and  delivery  of,  or  the
consummation of the transactions contemplated by, this Agreement.

                                      -23-

<PAGE>


     3.7 Voting Requirements. The affirmative vote of at least a majority of the
outstanding  shares of FIC Common  Stock  entitled  to vote with  respect to the
approval  of the  Charter  Amendment,  and the  affirmative  vote of at  least a
majority  of the shares of FIC Common  Stock  present (in person or by proxy) at
the FIC  Shareholders  Meeting  with  respect to the  issuance  of shares of FIC
Common  Stock in the  Merger,  are the only votes of the holders of any class or
series of FIC's capital stock necessary to approve the transactions contemplated
by this Agreement.

     3.8 Brokers.  Except as set forth in the FIC Disclosure  Letter, no broker,
finder or investment banker is entitled to any brokerage,  finder's or other fee
or commission in connection with the transactions contemplated hereby based upon
arrangements  made by or on behalf of FIC. A true,  correct and complete copy of
the engagement letter of Philo Smith & Co., Inc. has been delivered to ILCO.

     3.9  Fairness  Opinion.  The special  committee of FIC's Board of Directors
(the "FIC  Special  Committee")  has  received  an opinion of Philo Smith & Co.,
Inc.,  financial  advisor  to the FIC  Special  Committee,  (the  "FIC  Fairness
Opinion"),  to the effect  that the Merger is fair,  from a  financial  point of
view, to the shareholders of FIC.

     3.10 Compliance with Applicable  Laws. Each of FIC and its subsidiaries has
in effect all Permits  necessary for it to own,  lease or operate its properties
and  assets  and to carry on its  business  as now  conducted,  other  than such
Permits  the  absence of which  could  not,  individually  or in the  aggregate,
reasonably  be expected to have an FIC Material  Adverse  Effect,  and there has
occurred  no  default  under any such  Permit  other than such  defaults  which,
individually  or in the  aggregate,  could not reasonably be expected to have an
FIC Material Adverse Effect. FIC and its subsidiaries are in compliance with all
applicable  statutes,  laws,  ordinances,  rules orders and  regulations  of any
Governmental Entity, including without limitation, all applicable federal, state
and local  statutes  and  regulations  regulating  the  business and products of
insurance,  except for such noncompliance which individually or in the aggregate
could not reasonably be expected to have an FIC Material Adverse Effect.

     3.11 Absence of Undisclosed  Liabilities.  Except for liabilities disclosed
in the  FIC SEC  Documents,  liabilities  contemplated  by  this  Agreement  and
liabilities set forth in the FIC Disclosure  Letter, FIC and its subsidiaries do
not have any  material  indebtedness,  obligations  or  liabilities  of any kind
(whether accrued, absolute,  contingent or otherwise) (i) required by GAAP to be
reflected  on  a  consolidated   balance  sheet  of  FIC  and  its  consolidated
subsidiaries  or in the  notes,  exhibits  or  schedules  thereto  or (ii) which
reasonably could be expected to have an FIC Material Adverse Effect.

                                      -24-

<PAGE>


     3.12 Litigation. Except as disclosed in the FIC SEC Documents or in the FIC
Disclosure Letter, there is no litigation, administrative action, arbitration or
other  proceeding  pending  against  FIC or any of its  subsidiaries  or, to the
knowledge of FIC,  threatened  that,  individually  or in the  aggregate,  could
reasonably  be  expected  to (i) have an FIC  Material  Adverse  Effect  or (ii)
prevent,   or   significantly   delay  the   consummation  of  the  transactions
contemplated  by this  Agreement.  Except as set forth in the FIC SEC Documents,
there is no judgment,  order,  injunction or decree of any  Governmental  Entity
outstanding against FIC or any of its subsidiaries that,  individually or in the
aggregate,  could  reasonably be expected to have any effect  referred to in the
foregoing clauses (i) and (ii) of this Section 3.12.

     3.13 Transactions with Affiliates. Other than the transactions contemplated
by this Agreement or except to the extent  disclosed in the FIC SEC Documents or
as set forth in the FIC  Disclosure  Letter,  there  have been no  transactions,
agreements,  arrangements or understandings between FIC or its subsidiaries,  on
the one hand, and FIC's affiliates (other than subsidiaries of FIC) or any other
person, on the other hand, that would be required to be disclosed under Item 404
of Regulation S-K under the Securities Act.

     3.14 FIC Common  Stock.  The shares of FIC Common Stock to be issued in the
Merger will be, upon delivery against receipt of the shares of ILCO Common Stock
for which such  shares  will be issued in  accordance  with  Section 1.8 of this
Agreement,  duly authorized,  validly issued, fully paid and nonassessable.  The
shares of FIC Common  Stock to be issued  upon  exercise  of the  Assumed  Stock
Options (as defined in Section  6.2(a))  will be, upon  delivery of the exercise
price  therefor in  accordance  with the terms of the ILCO Stock Option Plan and
agreements  pursuant to which such  Assumed  Stock  Options  were  issued,  duly
authorized, validly issued, fully paid and nonassessable.

     3.15 Employee  Arrangements  and Benefit Plans.  (a) Except as set forth in
the FIC SEC Documents or in the FIC  Disclosure  Letter and except as could not,
individually or in the aggregate, reasonably be expected to have an FIC Material
Adverse  Effect:  (i) each FIC  Benefit  Plan  has been  administered  and is in
compliance  with the  terms of such  plan and all  applicable  laws,  rules  and
regulations, (ii) no "reportable event" (as such term is used in section 4043 of
ERISA)  (other  than those  events  for which the 30 day notice has been  waived
pursuant to the regulations),  "prohibited transaction" (as such term is used in
section  406 of ERISA or  section  4975 of the  Code)  or  "accumulated  funding
deficiency"  (as  such  term is used in  section  412 or 4971 of the  Code)  has
heretofore  occurred  with  respect to any FIC  Benefit  Plan and (iii) each FIC
Benefit Plan intended to qualify under Section 401(a) of the Code has received a
favorable  determination  from the IRS regarding its  qualified  status,  or the
remedial amendment period under Section 401(b) of the Code will not have expired
prior to the Closing  Date,  and no notice has been  received  from the IRS with
respect to the revocation of such qualification.

                                      -25-

<PAGE>

     (b) There is no litigation or administrative or other proceeding  involving
any FIC Benefit Plan or Employment  Arrangement nor has FIC or its  subsidiaries
received  written notice that any such  proceeding is  threatened,  in each case
where an adverse  determination  could  reasonably  be  expected  to have an FIC
Material  Adverse Effect.  Neither FIC nor any of its subsidiaries has incurred,
nor,  to the  best of  FIC's  knowledge,  is  reasonably  likely  to  incur  any
withdrawal   liability   under  Section  4201  of  ERISA  with  respect  to  any
"multiemployer  plan"  (within  the  meaning  of section  3(37) of ERISA)  which
remains  unsatisfied in an amount which could  reasonably be expected to have an
FIC Material  Adverse Effect.  The  termination of, or withdrawal  from, any FIC
Benefit Plan or multiemployer plan to which FIC or its subsidiaries contributes,
on or prior to the Closing Date, will not subject FIC or any of its subsidiaries
to any  liability  under Title IV of ERISA that could  reasonably be expected to
have an FIC Material Adverse Effect.

     3.16 Tax Matters.  FIC and each of its  subsidiaries  have timely filed (or
been  included in a  consolidated,  combined or unitary Tax Return that has been
timely  filed) with the  appropriate  Governmental  Entities  all  material  Tax
Returns  required  to be filed  through the date hereof and will timely file any
such  material Tax Returns  required to be filed on or prior to the Closing Date
(except  those under valid  extension)  and all such Tax Returns are and will be
true and correct in all material  respects.

          (b) all material Taxes of FIC and each of its  subsidiaries  have been
     or will be timely paid or adequately  reserved for in accordance  with GAAP
     in the Financial Statements.

          (c) FIC and its  subsidiaries  have complied in all material  respects
     with all applicable laws, rules and regulations relating to the withholding
     of Taxes.

          (d) Except as set forth in the FIC Disclosure Letter:

               (i) no material  deficiencies  for any Taxes have been  proposed,
          asserted or assessed against FIC or any of its subsidiaries  that have
          not been  fully paid or  adequately  provided  for in the  appropriate
          financial  statements  of FIC and its  subsidiaries,  and no  material
          issues   relating  to  Taxes  have  been  raised  in  writing  by  any
          Governmental Entity during any presently pending audit or examination;

               (ii) FIC and its subsidiaries are not now subject to audit by any
          Governmental  Entity and no waivers of  statutes  of  limitation  with
          respect to the Tax Returns  have been given by or requested in writing
          from FIC or any of its subsidiaries;

               (iii) there are no material Liens for Taxes (other than for Taxes
          not  yet  due  and  payable)  on  any  assets  of  FIC  or  any of its
          subsidiaries;

               (iv)  neither  FIC nor any of its  subsidiaries  is a party to or
          bound by (nor will any of them  become a party to or bound by) any Tax
          indemnity,   Tax  sharing,  Tax  allocation,   or  similar  agreement,
          arrangement   or  practice   with  respect  to  Taxes,   except  among
          themselves;

               (v)  neither  FIC nor any of its  subsidiaries  has  ever  been a
          member of an affiliated  group of  corporations  within the meaning of
          Section 1504 of the Code, other than the affiliated group of which FIC
          is the common parent;

               (vi) neither FIC nor any of its  subsidiaries has agreed to make,
          nor is any required to make,  any  adjustment  under Section 481(a) of
          the Code or any similar  provision  of state,  local or foreign law by
          reason of a change in accounting method or otherwise;

                                      -26-

<PAGE>

               (vii) neither FIC nor any of its  subsidiaries has received a Tax
          ruling  from  any  Governmental  Entity,  or  entered  into a  closing
          agreement with any Governmental  Entity,  that would have a continuing
          material effect after the Closing Date; and

               (viii) neither FIC nor any of its  subsidiaries is a party to any
          contract,  agreement  or other  arrangement  which would result in the
          payment of amounts that could be  nondeductible  by reason of Sections
          280G or 162(m) of the Code.

     (e) No  portion  of either  FIC or any of its  subsidiaries  is or has ever
been, a "taxable mortgage pool" as defined in Section 7701(i) of the Code.

     (f) For the taxable  period  ending on the  Closing  Date and for all prior
taxable  periods for which the statute of  limitations  has not expired,  Family
Life (i) qualifies (and qualified) as an "insurance  company" within the meaning
of Treasury  Regulation  Section  1.801- 3(a) (under  former  Section 801 of the
Code) and as a "life insurance  company" within the meaning of Section 816(a) of
the Code, and (ii) are (and were) subject to taxation under  Subchapter L of the
Code.

     (g) The  insurance  reserves and unearned  premiums with respect to FIC and
each of its  subsidiaries set forth in all their federal Tax Returns as to which
the statute of  limitations  has not expired  were  determined  in all  material
respects in accordance with Section 807 of the Code.

     (h) The unpaid losses with respect to FIC and each of its  subsidiaries set
forth in all of their federal Tax Returns as to which the statute of limitations
has not expired were based upon  reasonable  estimations  and were discounted in
all material respects in accordance with Section 846 of the Code.

     (i) Each  life  insurance  policy  and  annuity  contract  issued,  sold or
administered  by  FIC  or  any of  its  subsidiaries,  at  all  relevant  times,
satisfied, and does satisfy, the requirements of, and/or has qualified, and does
qualify, under, Sections 72, 264, 401(a),403(a), 403(b), 817, 7702, 7702A of the
Code and the  Treasury  Regulations  thereunder,  as  applicable,  except to the
extent that failures to satisfy or qualify in the aggregate,  were such failures
tripled, would not result in any FIC Material Adverse Effect.

     (j)  FIC has not  constituted  either  a  "distributing  corporation"  or a
"controlled  corporation"  (within  the meaning of Section  355(a)(1)(A)  of the
Code) in a distribution of stock qualifying for tax-free treatment under Section
355 of the Code (i) in the two years prior to the date of this Agreement or (ii)
in a distribution  which could otherwise  constitute part of a "plan" or "series
of related  transactions"  (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.

                                      -27-

<PAGE>


     (k)  Neither  FIC nor any of its  subsidiaries  knows of any fact,  plan or
circumstance  that is reasonably likely to prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code.

     3.17  Intellectual  Property.  Except  as set  forth in the FIC  Disclosure
Letter and except to the extent of any  inaccuracy  of any of the  following (or
the circumstances giving rise to such inaccuracy) which,  individually or in the
aggregate,  could not  reasonably  be expected to have an FIC  Material  Adverse
Effect:  (a) FIC and each of its  subsidiaries  owns,  or is licensed to use (in
each case, free and clear of any Liens),  all  Intellectual  Property used in or
necessary for the conduct of its business as currently conducted; (b) the use of
any Intellectual  Property by FIC and its  subsidiaries  does not infringe on or
otherwise  violate  the  rights  of any  person  and is in  accordance  with any
applicable license pursuant to which FIC or any subsidiary acquired the right to
use any  Intellectual  Property;  and (c) to the  knowledge of FIC, no person is
challenging, infringing on or otherwise violating any right of FIC or any of its
subsidiaries with respect to any Intellectual  Property owned by and/or licensed
to FIC or its subsidiaries;  and (d) neither FIC nor any of its subsidiaries has
received  any  written   notice  of  any  pending  claim  with  respect  to  any
Intellectual  Property used by FIC and its  subsidiaries and to its knowledge no
Intellectual  Property owned and/or licensed by FIC or its subsidiaries is being
used or enforced in a manner that would result in the abandonment,  cancellation
or unenforceability of such Intellectual Property.

     3.18 Environmental Matters. Except as disclosed in the FIC SEC Documents or
as set forth in the FIC Disclosure  Letter and except as could not reasonably be
expected to have an FIC Material  Adverse  Effect (a) the  operations of FIC and
its subsidiaries have been and are in compliance with all Environmental Laws and
with all Permits required by Environmental Laws, (b) there are no pending or, to
the knowledge of FIC,  threatened,  Actions  under or pursuant to  Environmental
Laws against FIC or its  subsidiaries  or involving any real property  currently
or, to the knowledge of FIC,  formerly  owned,  operated or leased by FIC or its
subsidiaries,  (c) FIC and its subsidiaries are not subject to any Environmental
Liabilities, and, to the knowledge of FIC, no facts, circumstances or conditions
relating to, arising from,  associated with or attributable to any real property
currently or, to the knowledge of FIC, formerly owned, operated or leased by FIC
or its  subsidiaries or operations  thereon that could reasonably be expected to
result in  Environmental  Liabilities,  (d) all real property owned,  and to the
knowledge  of  FIC,  all  real  property  operated  or  leased  by  FIC  or  its
subsidiaries is free of contamination  from Hazardous  Material and (e) there is
not now,  nor, to the  knowledge of FIC,  has there been in the past,  on, in or
under  any  real  property  owned,  leased  or  operated  by  FIC  or any of its
predecessors  (i) any  underground  storage tanks,  above-ground  storage tanks,
dikes   or   impoundments    containing    Hazardous    Materials,    (ii)   any
asbestos-containing  materials, (iii) any polychlorinated biphenyls, or (iv) any
radioactive substances.

     3.19 State Takeover Statutes.  No state takeover statute or similar statute
or regulation applies or purports to apply to the Merger,  this Agreement or any
of the  transactions  contemplated  by this  Agreement  and no  provision of the
Articles of Incorporation, Bylaws or other governing instrument of FIC or any of
its subsidiaries would,  directly or indirectly,  restrict or impair the ability
of FIC to consummate the transactions contemplated by this Agreement.

                                      -28-

<PAGE>


     3.20 Labor Matters.  Except as set forth in the FIC SEC Documents or in the
FIC Disclosure Letter, (a) neither FIC nor any of its subsidiaries is a party to
any labor or collective bargaining agreement,  and no employees of FIC or any of
its subsidiaries are represented by any labor organization, (b) to the knowledge
of FIC, there are no material  representation or certification  proceedings,  or
petitions  seeking a  representation  proceeding,  pending or  threatened  to be
brought or filed with the  National  Labor  Relations  Board or any other  labor
relations  tribunal or authority and (c) to the  knowledge of FIC,  there are no
material  organizing  activities  involving FIC or any of its subsidiaries  with
respect to any group of employees of FIC or its subsidiaries.

     3.21  Material  Contracts.  (a)  Except as set forth in the FIC  Disclosure
Letter,  all contracts and agreements of the FIC and its  subsidiaries  that are
required to be  described  in the FIC SEC  Documents  or to be filed as exhibits
thereto are  described  in the FIC SEC  Documents  or filed as exhibits  thereto
("FIC Material Contracts"),  respectively, and are in full force and effect and,
upon  consummation of the transactions  contemplated  hereby,  shall continue in
full force and effect without  penalty,  acceleration,  termination,  repurchase
right  or  other  adverse  consequence.  FIC has  previously  delivered  or made
available to ILCO,  true,  correct and complete  copies of all such FIC Material
Contracts. Neither FIC nor any of its subsidiaries, nor to the knowledge of FIC,
any  other  party is in  breach of or in  default  under  any such FIC  Material
Contract and no event has occurred  that with the lapse of time or the giving of
notice or both would constitute a default thereunder by FIC or, to the knowledge
of FIC, any other party thereto, in any such case in which such default or event
could reasonably be expected to have an FIC Material Adverse Effect. Neither FIC
nor any  subsidiary of FIC has received any written  notice (or to the knowledge
of FIC any other  notice)  of  default  or  termination  under any FIC  Material
Contract,  and to the knowledge of FIC,  there exists no basis for any assertion
of a right of default or termination under such FIC Material Contracts.

     3.22 Tangible  Property.  All of the assets of FIC and its subsidiaries are
in good operating  condition,  reasonable wear and tear excepted,  and usable in
the  ordinary  course  of  business,  except  where  the  failure  to be in such
condition or so usable could not,  individually or in the aggregate,  reasonably
be expected to have an FIC Material Adverse Effect.

     3.23 Insurance Business.

          (a) Except as otherwise  could not,  individually or in the aggregate,
     reasonably  be  expected  to  have  an FIC  Material  Adverse  Effect,  all
     policies,  binders,  slips,  certificates,  guaranteed insurance contracts,
     annuity  contracts and  participation  agreements  and other  agreements of
     insurance,  whether  individual  or group,  in effect as of the date hereof
     (including  all  applications,   supplements,   endorsements,   riders  and
     ancillary  agreements  in connection  therewith)  that are issued by Family
     Life Insurance  Company  ("Family Life") or any predecessor of Family Life,
     and any and all  marketing  materials,  are, to the extent  required  under
     applicable  law,  on forms  approved  by  applicable  insurance  regulatory
     authorities  or  which  have  been  filed  and  not  objected  to  by  such
     authorities  within the period  provided for objection,  and such forms and
     marketing  materials  comply in all material  respects  with the  insurance
     statutes, regulations and rules applicable thereto.

                                      -29-

<PAGE>



          (b) FIC has  delivered or made  available to ILCO a true,  correct and
     complete copy of all actuarial reports prepared by FIC's actuaries, and any
     actuarial  reports prepared by other  actuaries,  independent or otherwise,
     with  respect to Family Life since  January 1, 1998,  and all  attachments,
     addenda,   supplements  and  modifications   thereto  (the  "FIC  Actuarial
     Analyses").  To the knowledge of FIC, the information and data furnished by
     FIC or Family Life to its  independent  actuaries  in  connection  with the
     preparation  of the FIC  Actuarial  Analyses  were accurate in all material
     respects.  Furthermore,  each FIC  Actuarial  Analysis  was  based  upon an
     accurate  inventory of policies in force for Family  Life,  at the relevant
     time of preparation,  was prepared using  appropriate  modeling  procedures
     accurately  applied and in conformity  with  generally  accepted  actuarial
     standards  consistently applied, and the projections contained therein were
     properly prepared in accordance with the assumptions stated therein.

          (c) To the knowledge of FIC, except as set forth in the FIC Disclosure
     Letter or as reserved  for or  disclosed  in the FIC SEC  Documents,  or as
     could not, individually or in the aggregate, reasonably be expected to have
     an FIC Material Adverse Effect, all amounts  recoverable under reinsurance,
     coinsurance  or other  similar  contracts  to which  Family Life is a party
     (including,  but not limited to,  amounts based on paid and unpaid  losses)
     are fully collectible.

          (d) FIC has  delivered  or made  available  to ILCO true,  correct and
     complete copies of all analyses,  reports and other data prepared by FIC or
     Family Life or submitted by FIC or Family Life to any insurance  regulatory
     authority or received by FIC or Family Life relating to risk-based  capital
     calculations or IRIS ratios of the years ended December 31, 1999 and 1998.

          (e) FIC has  delivered or made  available to ILCO a true,  correct and
     complete list on a per risk and aggregate  basis of the maximum  underlying
     retentions  (net  of  all  reinsurance  maintained)  on all  insurance  and
     reinsurance  policies written or entered into by Family Life since December
     31, 1999.

          (f) Except as could not, individually or in the aggregate,  reasonably
     be expected to have an FIC Material Adverse Effect,  all annuity  contracts
     and life insurance  policies issued by Family Life meet all definitional or
     other requirements for qualification  under the Code section applicable (or
     intended to be  applicable)  to such annuity  contracts  or life  insurance
     policies.

          (g)  Except  as set  forth  the FIC  Disclosure  Letter,  there are no
     material  "hold  harmless"  indemnification  agreements  respecting the Tax
     qualification  or  treatment of any product or plan sold,  issued,  entered
     into or administered by Family Life, and there have been no claims asserted
     by any person under such "hold harmless" indemnification agreements.

     3.24 Liabilities and Reserves.

          (a) Except as set forth in the FIC  Disclosure  Letter,  the  reserves
     carried on the books of Family Life for future  insurance  policy benefits,
     losses,  claims and similar  purposes were, as of the  respective  dates of
     such FIC financial  statements  required to be submitted to the appropriate
     regulatory  authority of the jurisdiction in which Family Life is domiciled
     on forms  prescribed  or permitted by such  authority in  compliance in all
     material  respects with the  requirements  for reserves  established by the
     insurance  department  of the  state  of  domicile  of  Family  Life,  were
     determined in all material  respects in accordance with generally  accepted
     actuarial  standards  consistently  applied,  and were fairly stated in all
     material   respects  in  accordance  with  sound  actuarial  and  statutory
     accounting  principles.  FIC has delivered or made  available to ILCO true,
     correct  and  complete  copies of the Annual  Statements  delivered  to the
     insurance  department of the domiciliary state of Family Life for the years
     ended  December 31, 1999 and 1998.  FIC has delivered or made  available to
     ILCO  copies of all work  papers  used as the basis  for  establishing  the
     reserves  for Family  Life at  December  31, 1999 and  December  31,  1998,
     respectively,  as well as all reports  with respect to the adequacy of such
     reserves.


                                      -30-

<PAGE>

          (b) Except for regular periodic  assessments in the ordinary course of
     business or as reserved for or disclosed in the FIC SEC Documents, no claim
     or assessment is pending nor, to the knowledge of FIC,  threatened  against
     Family Life by any state insurance guaranty associations in connection with
     such  association's fund relating to insolvent insurers which if determined
     adversely, could, individually or in the aggregate,  reasonably be expected
     to have an FIC Material Adverse Effect.

                                   ARTICLE IV
                  REPRESENTATIONS AND WARRANTIES OF MERGER SUB

FIC and Merger Sub represent and warrant to ILCO as follows:

     4.1 Organization,  Standing and Corporate Power Merger Sub is a corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
State of Texas and has the requisite  corporate  power and authority to carry on
its business as now being conducted. Merger Sub is duly qualified to do business
and in good standing in each jurisdiction in which the nature of its business or
the  ownership  or  leasing  of its  properties  would  make such  qualification
necessary,  except where the failure to be so qualified  could not reasonably be
expected to have a FIC Material Adverse Effect.

     4.2 Capital Structure.  The authorized capital stock of Merger Sub consists
of 1,000 shares of common  stock,  $0.01 par value,  all of which are issued and
outstanding  and owned of record and  beneficially by FIC, free and clear of all
Liens.  All  outstanding  shares  of  capital  stock  of  Merger  Sub  are  duly
authorized,  validly  issued,  fully paid and  nonassessable  and not subject to
preemptive   rights.   Merger  Sub  has  no   outstanding   options,   warrants,
subscriptions  or other rights,  agreements or commitments  that obligates it to
issue,  sell or transfer,  repurchase,  redeem or otherwise  acquire or vote any
shares of the capital stock of Merger Sub.

     4.3  Authority;  Noncontravention.  Merger Sub has all requisite  corporate
power  and  authority  to  enter  into  this  Agreement  and to  consummate  the
transactions  contemplated by this Agreement. The execution and delivery of this
Agreement  by  Merger  Sub  and  the  consummation  by  it of  the  transactions
contemplated  by this  Agreement,  have been duly  authorized  by all  necessary
corporate action on the part of Merger Sub, including all necessary  stockholder
approval.  This  Agreement  has been duly  executed and delivered by Merger Sub,
and, assuming this Agreement  constitutes the valid and binding agreement of FIC
and ILCO,  constitutes a valid and binding  obligation of Merger Sub enforceable
against it in accordance with its terms except that the enforcement  thereof may
be limited by (a) bankruptcy, insolvency, reorganization,  moratorium or similar
laws now or hereafter in effect relating to creditor's  rights generally and

                                      -31-

<PAGE>

(b)  general  principles  of equity  (regardless  of whether  enforceability  is
considered in a proceeding  at law or in equity).  The execution and delivery of
this Agreement do not, and the consummation of the transactions  contemplated by
this  Agreement and  compliance  with the provisions of this Agreement will not,
(i) conflict  with any of the  provisions  of the Articles of  Incorporation  or
Bylaws of Merger  Sub,  or (ii)  subject to the  governmental  filings and other
matters  referred to in the  following  sentence,  contravene  any law,  rule or
regulation  of any state or of the United  States or any  political  subdivision
thereof  or  therein,  or  any  order,  writ,  judgment,   injunction,   decree,
determination   or  award   currently  in  effect.   No  consent,   approval  or
authorization  of, or declaration or filing with, or notice to, any Governmental
Entity  which has not been  received or made is  required by or with  respect to
Merger Sub in connection with the execution and delivery of this Agreement by it
or  the  consummation  by it of any of the  transactions  contemplated  by  this
Agreement,  except for (i) the filing of premerger notification and report forms
under the HSR Act with  respect  to the Merger  and the  termination  or earlier
expiration of the applicable  waiting periods  thereunder and (ii) the filing of
articles of merger with the Texas Secretary of State.

     4.4 No Prior  Activities.  Except  for this  Agreement,  Merger Sub (i) was
recently formed,  (ii) has not entered into any agreements or arrangements  with
any  person  and  (iii)  is  not  subject  to or  bound  by  any  obligation  or
undertaking.  Except  as  contemplated  by this  Agreement,  Merger  Sub has not
engaged, directly or indirectly, in any business activities of any type or kind.

                                   ARTICLE V
                             ADDITIONAL AGREEMENTS

     5.1   Preparation  of  Form  S-4  and  Joint  Proxy   Statement/Prospectus;
Information Supplied.

     (a) As soon as practicable  following the date of this  Agreement,  (i) FIC
and  ILCO  shall  prepare  and  file  with  the SEC a  preliminary  Joint  Proxy
Statement/Prospectus  ("Joint  Proxy  Statement/Prospectus")  and (ii) FIC shall
prepare and file with the SEC a  Registration  Statement  on Form S-4 (the "Form
S-4") with respect to the  registration  of the issuance of shares of FIC Common
Stock in the Merger, of which the Joint Proxy  Statement/Prospectus  will form a
part.  FIC shall use its  commercially  reasonable  efforts to have the Form S-4
declared  effective  under the Securities  Act as promptly as practicable  after
such  filing.  Each of FIC and ILCO  shall  use  their  commercially  reasonable
efforts  to cause the  Joint  Proxy  Statement/Prospectus  to be mailed to FIC's
shareholders and ILCO's  shareholders as promptly as practicable  after the Form
S-4 is declared  effective  under the  Securities  Act.  FIC shall also take any
action (other than qualifying to do business in any  jurisdiction in which it is
not now so qualified or take any action that would  subject it to the service of
process in suits, other than as to matters and transactions relating to the Form
S-4, in any jurisdiction  where it is not so subject) required to be taken under
any applicable  state securities laws in connection with the issuance of the FIC
Common  Stock in the Merger and ILCO shall  furnish all  information  concerning
itself  and the  holders  of shares of ILCO  Common  Stock as may be  reasonably
requested in connection with any such action.

                                      -32-

<PAGE>

          (b) ILCO  agrees and  represents  and  warrants  that the  information
     supplied  or  to  be  supplied  by  it   specifically   for   inclusion  or
     incorporation  by  reference  in the (i) Form S-4 will not, at the time the
     Form S-4 is filed with the SEC,  at any time it is amended or  supplemented
     or at the time it becomes  effective under the Securities Act,  contain any
     untrue  statement  of a material  fact or omit to state any  material  fact
     required to be stated  therein or necessary in order to make the statements
     therein,  in light of the  circumstances  under  which  they are made,  not
     misleading,  or (ii) the Joint Proxy  Statement/Prospectus will not, at the
     date it is first  mailed  to FIC's  shareholders  or at the time of the FIC
     Shareholders Meeting, contain any statement which, at the time and in light
     of the  circumstances  under which it is made, is false or misleading  with
     respect to any material fact, or omits to state any material fact necessary
     in  order  to make the  statements  therein  not  false  or  misleading  or
     necessary  to correct  any  statement  in any  earlier  communication  with
     respect  to the  solicitation  of a proxy for the same  meeting  or subject
     matter thereof which has become false or  misleading.  ILCO agrees that the
     Joint Proxy  Statement/Prospectus  will  comply as to form in all  material
     respects  with the  requirements  of the  Exchange  Act and the  rules  and
     regulations  promulgated  thereunder,  except in each case with  respect to
     statements   made  or   incorporated   by  reference  in  the  Joint  Proxy
     Statement/Prospectus   supplied  by  FIC   specifically  for  inclusion  or
     incorporation   by   reference   therein  as  to  which  ILCO   assumes  no
     responsibility.

          (c) FIC  agrees  and  represents  and  warrants  that the  information
     supplied  or  to  be  supplied  by  it   specifically   for   inclusion  or
     incorporation  by  reference  in (i) the Form S-4 will not, at the time the
     Form S-4 is filed with the SEC,  at any time it is amended or  supplemented
     or at the time it becomes  effective under the Securities Act,  contain any
     untrue  statement  of a material  fact or omit to state any  material  fact
     required to be stated  therein or necessary in order to make the statements
     therein,  in light of the  circumstances  under  which  they are made,  not
     misleading,  or (ii) the Joint Proxy  Statement/Prospectus will not, at the
     date it is first mailed to ILCO's  shareholders  or at the time of the ILCO
     Shareholders Meeting, contain any statement which, at the time and in light
     of the  circumstances  under which it is made, is false or misleading  with
     respect to any material fact, or omits to state any material fact necessary
     in  order  to make the  statements  therein  not  false  or  misleading  or
     necessary  to correct  any  statement  in any  earlier  communication  with
     respect  to the  solicitation  of a proxy for the same  meeting  or subject
     matter  thereof which has become false or  misleading.  FIC agrees that the
     Form  S-4  will  comply  as to  form  in all  material  respects  with  the
     requirements   of  the  Securities  Act  and  the  rules  and   regulations
     promulgated    thereunder   and   FIC   agrees   that   the   Joint   Proxy
     Statement/Prospectus  will comply as to form in all material  respects with
     the  requirements  of the  Exchange  Act  and  the  rules  and  regulations
     promulgated thereunder, except in each case with respect to statements made
     or   incorporated  by  reference  in  the  Form  S-4  or  the  Joint  Proxy
     Statement/Prospectus   supplied  by  ILCO  specifically  for  inclusion  or
     incorporation   by   reference   therein   as  to  which  FIC   assumes  no
     responsibility.

     5.2  Shareholder  Approval.

     (a) ILCO agrees that it will take all action  necessary in accordance  with
applicable law and its Articles of Incorporation and Bylaws to convene a meeting
of its shareholders (the "ILCO Shareholders  Meeting") to submit this Agreement,
together  (subject to Section 5.5(b) below) with the affirmative  recommendation
of the  ILCO  Special  Committee  and  ILCO's  Board  of  Directors,  to  ILCO's
shareholders  so that  they may  consider  and vote  upon the  approval  of this
Agreement and the Merger. ILCO will use its


                                      -33-

<PAGE>

commercially reasonable efforts to hold the ILCO Shareholders Meeting and obtain
the ILCO Shareholders Approval as soon as practicable after the date hereof and,
so long as the  recommendation  of the ILCO  Special  Committee  or the Board of
Directors of ILCO has not been withdrawn or modified in accordance  with Section
5.5(b),  to  obtain  the  favorable  votes of its  shareholders.  Except  as may
otherwise be permitted by Section  5.5(b),  the ILCO Special  Committee  and the
Board of Directors of ILCO shall recommend to its shareholders that they vote in
favor of the  approval and adoption of this  Agreement  and the Merger.  Without
limiting  the  generality  of the  foregoing,  ILCO  agrees  that,  unless  this
Agreement is first  terminated in accordance  with Section 8.1, its  obligations
pursuant to the first two sentences of this Section 5.2(a) shall not be affected
by (i) the commencement,  public proposal, public disclosure or communication to
ILCO of any  Acquisition  Proposal (as defined in Section  5.5(c) below) or (ii)
the withdrawal or modification by the Board of Directors of ILCO of its approval
or  recommendation  of this  Agreement  or the Merger,  except with respect to a
withdrawal or modification of the affirmative recommendation of the ILCO Special
Committee or the Board of Directors of ILCO in accordance with Section 5.5(b).

     (b) FIC agrees that it will take all action  necessary in  accordance  with
applicable law and its Articles of Incorporation and Bylaws to convene a meeting
of its shareholders (the "FIC  Shareholders  Meeting") to submit the issuance of
shares of FIC Common Stock pursuant to this Agreement and the Charter Amendment,
together with the affirmative recommendation of FIC's Board of Directors, to the
FIC's  shareholders  so that they may consider and vote upon the approval of the
issuance of shares of FIC Common Stock in the Merger and the Charter  Amendment.
FIC will use its  commercially  reasonable  efforts to hold the FIC Shareholders
Meeting as soon as practicable after the date hereof and to obtain the favorable
votes of its shareholders.  The Board of Directors of FIC shall recommend to its
shareholders  that they vote in favor of the  approval of the issuance of shares
of FIC Common Stock in the Merger and the Charter Amendment.

     5.3 Access to Information; Confidentiality. Upon reasonable notice, each of
FIC and ILCO shall,  and shall cause each of their  respective  subsidiaries to,
afford to the other parties hereto and to their respective officers,  employees,
counsel,  financial advisors and other representatives  reasonable access during
normal  business  hours during the period prior to the Effective Time to all its
properties,  books,  contracts,  commitments,  personnel and records and, during
such  period,  each of FIC  and  ILCO  shall,  and  shall  cause  each of  their
respective  subsidiaries  to,  furnish as promptly as  practicable  to the other
parties hereto such information concerning its business,  properties,  financial
condition,  operations  and  personnel  as such  parties  may from  time to time
reasonably request. Except as required by law or the rules of regulations of the
Nasdaq Stock Market or any national stock  exchange,  each of FIC and ILCO agree
that,  until the  earlier of (i) two years from the date of this  Agreement  and
(ii) the Effective Time, each of FIC and ILCO and their respective  subsidiaries
will  not,  and  will  cause  its  respective  directors,   officers,  partners,
employees,   agents,   accountants,   counsel,   financial  advisors  and  other
representatives  and  affiliates   (collectively,   "Representatives")  not  to,
disclose any  nonpublic  information  obtained from FIC or ILCO, as the case may
be, to any other person, in whole or in part, other than to its  Representatives
in  connection  with an  evaluation  of the  transactions  contemplated  by this
Agreement,  and each of FIC and ILCO and their respective subsidiaries will not,
and will cause its respective  Representatives not to, use any of such nonpublic
information to directly or indirectly  divert or attempt to divert any business,
customer or employee of the other.

                                      -34-

<PAGE>

     5.4 Public Announcements. Each of FIC and ILCO agree that they will consult
with each other before  issuing,  and will provide each other the opportunity to
review and comment  upon,  any press  release or other  public  statements  with
respect  to the  transactions  contemplated  by this  Agreement,  including  the
Merger,  and  shall not issue any such  press  release  or make any such  public
statement  prior to such  consultation,  except as may be required by applicable
law,  court  process  or by  obligations  pursuant  to  rules  of  any  national
securities  exchange or The Nasdaq  Stock  Market (to the extent  applicable  to
them).  Notwithstanding  the foregoing,  each of FIC and ILCO shall,  before the
opening of business on the day after the  execution of this  Agreement,  issue a
press release describing the terms and conditions of the Merger;  provided, that
the form and  content of any such press  release is  acceptable  to both FIC and
ILCO, which acceptance shall not be unreasonably withheld or delayed.

     5.5 Acquisition Proposals.

     (a) From and after the date hereof,  without the prior  written  consent of
FIC, ILCO shall not, and shall not  authorize or permit any of its  subsidiaries
to, and shall direct and use its best efforts to cause its and its subsidiaries'
Representatives  not to,  (i)  directly  or  indirectly,  solicit,  initiate  or
encourage (including by way of furnishing information or assistance) or take any
other action to  facilitate  any  inquiries or the making of any proposal  which
constitutes or may reasonably be expected to lead to an Acquisition Proposal (as
defined  below)  or  (ii)  enter  into  or  participate  in any  discussions  or
negotiations  regarding any Acquisition  Proposal.  ILCO shall immediately cease
and terminate any existing solicitation,  initiation,  encouragement,  activity,
discussion or  negotiation  with any persons  conducted  heretofore by it or its
Representatives with respect to the foregoing. Notwithstanding the foregoing and
anything to the contrary contained in this Section 5.5 or in any other provision
of  this  Agreement,  ILCO  and  its  Board  of  Directors  may  participate  in
discussions  or  negotiations   (including,   as  a  part  thereof,  making  any
counterproposal)  with or  furnish  information  to any  third  party  making an
unsolicited   Acquisition  Proposal  (a  "Potential  Acquiror")  or  approve  an
unsolicited  Acquisition  Proposal  if the  Board  of  Directors  of ILCO or any
special  committee  thereof  is  advised  by its  financial  advisor  that  such
Potential  Acquiror has the financial  wherewithal  to be reasonably  capable of
consummating  such an Acquisition  Proposal,  and the Board of Directors of ILCO
determines in good faith (A) after receiving advice from such financial advisor,


                                      -35-

<PAGE>

that such third party has submitted to ILCO an  Acquisition  Proposal which is a
Superior  Proposal  (as  defined in Section  5.5(d)  below),  and (B) based upon
advice of  outside  legal  counsel,  that the  failure  to  participate  in such
discussions  or  negotiations  or to  furnish  such  information  or  approve an
Acquisition Proposal would violate the Board's fiduciary duties under applicable
law.  ILCO  agrees  that any  non-public  information  furnished  to a Potential
Acquiror   will  be  pursuant   to  a   confidentiality   agreement   containing
confidentiality  and  standstill  provisions.  In  the  event  that  ILCO  shall
determine to provide any  information as described  above,  or shall receive any
Acquisition  Proposal,  it shall  promptly  inform FIC in writing as to the fact
that  information  is to be provided  and shall  furnish FIC the identity of the
recipient of such  information  and/or the  Potential  Acquiror and the terms of
such Acquisition Proposal. ILCO will inform FIC promptly of any material changes
or amendment  to the  essential  terms of any such  Acquisition  Proposal.  ILCO
expressly agrees and acknowledges that (i) nothing contained in this Section 5.5
shall in any way be construed to be an authorization by FIC of the acceptance of
any Superior  Proposal,  it being  understood  that FIC expressly  disclaims any
implication  that FIC may be deemed to have  consented  to the  acceptance  of a
Superior  Proposal by virtue of the  provisions of this Section 5.5 and (ii) the
sole purpose of this Section 5.5 is to permit the  termination of this Agreement
by ILCO in accordance  with Section  8.1(b)(vii) in the event the conditions set
forth in this Section 5.5 are satisfied.

     (b) Neither the Board of Directors of ILCO nor any committee  thereof shall
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to
FIC,  the  approval or  recommendation  by such Board of  Directors or committee
thereof of this Agreement or the Merger,  (ii) approve or recommend,  or propose
to approve or recommend,  any Acquisition  Proposal or (iii) cause ILCO to enter
into any letter of intent,  agreement  in  principle,  acquisition  agreement or
other similar agreement related to any Acquisition Proposal;  provided, however,
that the Board of  Directors  or any  committee  thereof may  withdraw or modify
their approval or  recommendation of this Agreement or the Merger and approve or
recommend an Acquisition Proposal in the event that the Board determines in good
faith  (A)  after  receiving  advice  from  its  financial  advisor,  that  such
Acquisition Proposal is a Superior Proposal and (B) based upon advice of outside
legal counsel, that the failure to take such action would violate the Board's or
any such committee's fiduciary duties under applicable law.

     (c) For purposes of this  Agreement,  an  "Acquisition  Proposal" means any
proposal or offer from any person  (other  than FIC or any of its  subsidiaries)
for  a  tender  or  exchange  offer,  merger,   consolidation,   other  business
combination,  recapitalization,  liquidation, dissolution or similar transaction
involving  ILCO or any of its  subsidiaries,  or any  proposal to acquire in any
manner a substantial equity interest in, or an substantial portion of the assets
of, ILCO or any of its subsidiaries.

     (d) The term "Superior  Proposal"  means any bona fide proposal to acquire,
directly  or  indirectly  (by way of tender  offer,  share  purchase,  merger or
otherwise),  all of the  outstanding  shares of capital stock of ILCO (including
options and other  derivative  securities  exercisable  for or convertible  into
capital stock of ILCO) for consideration  consisting of cash and/or  securities,
on terms which the Board of  Directors  of ILCO  determines  in good faith to be
more favorable to ILCO and its  shareholders  than the Merger (based upon advice
of the  financial  advisor of the Board of  Directors  of ILCO or any  committee
thereof that the value of the  consideration  provided  for in such  proposal is
superior to the value of the Merger Consideration),  for which financing, to the
extent  required,  is then  committed  or which,  in the good  faith  reasonable
judgment of the Board of  Directors  of ILCO,  after  receiving  advice from its
financial advisor, is reasonably capable of being financed by such third party.

                                      -36-

<PAGE>


     5.6 Consents, Approvals and Filings. FIC and ILCO will make and cause their
respective subsidiaries and, to the extent necessary,  their other affiliates to
make all necessary filings, including,  without limitation, those required under
the HSR  Act,  applicable  state  insurance  laws,  the  Securities  Act and the
Exchange Act in order to facilitate  the prompt  consummation  of the Merger and
the other transactions contemplated by this Agreement. In addition, FIC and ILCO
will  each  use  their  respective  commercially  reasonable  efforts,  and will
cooperate fully and in good faith with each other,  (a) to comply as promptly as
practicable with all governmental  requirements applicable to the Merger and the
other transactions contemplated by this Agreement, and (b) to obtain as promptly
as practicable all necessary  permits,  orders or other consents of Governmental
Entities and consents of all third parties necessary for the consummation of the
Merger and the other  transactions  contemplated by this Agreement.  Each of FIC
and ILCO shall use their respective  commercially reasonable efforts to promptly
provide such  information and  communications  to Governmental  Entities as such
Governmental  Entities may reasonably request.  Each of the parties hereto shall
provide to the other parties copies of all  applications in advance of filing or
submission of such applications to Governmental Entities in connection with this
Agreement and shall make such revisions thereto as reasonably  requested by each
other  party  hereto.  Each of the  parties  hereto  shall  provide to the other
parties  the   opportunity   to   participate   in  all  meetings  and  material
conversations   with   Governmental   Entities   with  respect  to  the  matters
contemplated  by this  Agreement.

     5.7 Affiliate Letters. Prior to the Closing Date, ILCO shall deliver to FIC
a letter  identifying  all persons who, at the time the Merger is submitted  for
approval to the  shareholders,  may be deemed to be an "affiliate" of such party
for  purposes  of  Rule  145  under  the  Securities  Act.  ILCO  shall  use its
commercially  reasonable  efforts to cause each such person to deliver to FIC on
or prior to the  Closing  Date a  written  agreement  substantially  in the form
attached as Exhibit A hereto.

     5.8 Nasdaq Listing.  FIC shall use its commercially  reasonable  efforts to
cause the  shares of FIC  Common  Stock to be issued in the  Merger and upon the
exercise of the  Assumed  Stock  Options  (as  defined in Section  6.3(a)) to be
approved for quotation in the Nasdaq Stock Market's Small Cap Market.

     5.9 INDEMNIFICATION OF OFFICERS AND DIRECTORS.

     (a) The Articles of Incorporation  and Bylaws of the Surviving  Corporation
shall  contain  the  provisions  with  respect  to  indemnification  at least as
favorable  as those  contained in the  Articles of  Incorporation  and Bylaws of
ILCO,  as in effect on the date  hereof,  and none of such  provisions  shall be
amended,  repealed  or  otherwise  modified  for a period of six years after the
Effective Time in any manner that would adversely  affect the rights  thereunder
of  individuals  who at any time prior to the Effective  Time were  directors or
officers of ILCO or any of its respective  subsidiaries in respect of actions or
omissions  occurring  at or  prior to the  Effective  Time  (including,  without
limitation,  the  transactions  contemplated  by this  Agreement),  unless  such
modification is required by law.

                                      -37-

<PAGE>

     (b)  To  the  extent,  if  any,  not  provided  by  an  existing  right  of
indemnification  or other agreement or policy (and in addition to the agreements
set forth in Section 5.9(a) above),  from and after the Effective  Time, FIC and
the Surviving  Corporation,  jointly and severely  shall,  to the fullest extent
permitted by applicable law, indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date hereof,  or who becomes  prior
to the date hereof,  or who becomes prior to the Effective  Time, (i) an officer
or director of ILCO or any of its subsidiaries  (including  without  limitation,
members of the ILCO  Special  Committee),  (ii) an officer or director of Merger
Sub or (iii) an  officer  or  director  of FIC,  including  without  limitation,
members of the FIC Special Committee,  (and each such person's heirs,  executors
and   administrators)   (each  an  "Indemnified   Party"  and  collectively  the
"Indemnified  Parties")  against  all  losses,  expenses  (including  reasonable
attorney's fees and expenses), claims, damages or liabilities or, subject to the
written  consent  of  FIC or  the  Surviving  Corporation  (which  shall  not be
unreasonably withheld), amounts paid in settlement, including the advancement of
expenses  relating  thereto,  arising out of  threatened,  pending or  completed
actions, suits or other proceedings, whether civil, criminal,  administrative or
investigative  or other  type  whatsoever,  occurring  prior to, at or after the
Effective  Time that are,  in whole or in part,  based on or arising  out of the
fact that such person is or was a director or officer of such party.

     (c) The  provisions  of this Section 5.9 are intended to be for the benefit
of, and shall be  enforceable  by,  each  Indemnified  Party,  his heirs and his
personal  representatives  and shall be binding on all successors and assigns of
FIC, the Surviving Corporation and ILCO.

     5.10 Letter of FIC's Accountants. FIC shall use its commercially reasonable
efforts to cause to be delivered to ILCO a letter of PricewaterhouseCoopers LLP,
FIC's  independent  public   accountants,   and  any  other  independent  public
accountants  whose  report  would be  required  to be  included  in the Form S-4
pursuant to the rules and  regulations  under the  Securities  Act, each dated a
date within two business days before the date on which the Form S-4 shall become
effective  and an  additional  letter  from each of them dated a date within two
business days before the Closing Date, each addressed to such party, in form and
substance  reasonably  satisfactory to ILCO and customary in scope and substance
for letters  delivered by  independent  public  accountants  in connection  with
registration statements similar to the Form S-4.

     5.11  Letter  of  ILCO's  Accountants.  ILCO  shall  use  its  commercially
reasonable   efforts   to  cause   to  be   delivered   to  FIC  a   letter   of
PricewaterhouseCoopers LLP, ILCO's independent public accountants, and any other
independent  public accountants whose report would be required to be included in
the Form S-4 pursuant to the rules and  regulations  under the  Securities  Act,
each dated a date within two business days before the date on which the Form S-4
shall become  effective and an additional  letter from each of them dated a date
within two business days before the Closing Date,  each addressed to such party,
in form and substance reasonably  satisfactory to FIC and customary in scope and
substance for letters delivered by independent  public accountants in connection
with registration statements similar to the Form S- 4.

                                      -38-

<PAGE>



     5.12 FIC Stock Option Held by Investors-NA.  ILCO covenants and agrees that
it will use its best  efforts to cause  Investors-NA  to enter into an agreement
with FIC whereby the terms and provisions of the agreement, dated March 21, 1991
(which  agreement grants to Investors-NA an option to purchase up to 9.9% of the
outstanding shares of FIC Common Stock) (the "Investors-NA  Option  Agreement"),
are modified so as to provide  Investors-NA  an option to purchase up to 500,411
shares of FIC Common Stock (such amount being 9.9% of the outstanding  shares of
FIC  Common  Stock  as of the  date of this  Agreement).  The  amendment  to the
Investors-NA  Option Agreement described in this Section 5.12 shall be effective
as of the Effective Time.

     5.13 Vote of Shares of ILCO Common Stock by FIC. FIC  covenants  and agrees
that,  at the  ILCO  Shareholders  Meeting,  FIC  shall,  and  shall  cause  its
subsidiaries  to, vote all shares of ILCO Common  Stock held of record by FIC or
its subsidiaries  either "for" or "against" the Merger in the same manner as the
prevailing  majority of the shares of ILCO Common  Stock (other than shares held
of record by FIC or any of its  subsidiaries)  voted (in person or by proxy) (it
being  understood  that,  for  purposes  of  this  Section  5.13,  FIC  and  its
subsidiaries will vote 100% of the shares held by them collectively either "for"
or "against"  the Merger,  and  abstentions  and broker  non-votes  shall not be
counted for purposes of  determining  the  prevailing  majority of the shares of
ILCO Common Stock voting on the Merger).

                        ARTICLE VI COVENANTS RELATING TO
                       CONDUCT OF BUSINESS PRIOR TO MERGER

     6.1 Conduct of Business of ILCO.  Except as expressly  contemplated by this
Agreement,  during the period from the date of this  Agreement to the  Effective
Time, ILCO shall,  and shall cause its  subsidiaries  to, act and carry on their
respective  businesses  in the  ordinary  course of business  and, to the extent
consistent  therewith,  use commercially  reasonable  efforts to preserve intact
their  current  business  organizations,  keep  available  the services of their
current  officers and  employees  and preserve the goodwill of those  engaged in
material business  relationships  with them.  Without limiting the generality of
the  foregoing,  during  the  period  from  the  date of this  Agreement  to the
Effective Time and except as set forth in the ILCO SEC Documents or as set forth
in the ILCO Disclosure  Letter,  ILCO shall not, and shall not permit any of its
subsidiaries to, without the prior consent of FIC:

     (a) (i)  declare,  set  aside or pay any  dividends  on,  or make any other
distributions  (whether in cash, stock or property) in respect of, any of its or
its subsidiaries'  outstanding capital stock (except dividends and distributions
by a direct or indirect  wholly owned  subsidiary  of ILCO to its parent),  (ii)
split,  combine or reclassify any of its  outstanding  capital stock or issue or
authorize  the issuance of any other  securities in respect of, in lieu of or in
substitution  for  shares of its  outstanding  capital  stock,  (iii)  except in
connection  with the  termination of the employment of any employees,  purchase,
redeem or  otherwise  acquire  any shares of  outstanding  capital  stock or any
rights,  warrants or options to acquire any such  shares,  or (iv) issue,  sell,
grant,  pledge or otherwise  encumber any shares of its capital stock, any other
equity securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, equity securities or convertible securities
(other than (A) upon the exercise of ILCO Stock Options  outstanding on the date
of this  Agreement or issued under clause (C) below,  (B) pursuant to employment
agreements  or other  contractual  arrangements  in  effect  on the date of this
Agreement  and (C)  issuances  of stock of any direct or indirect  wholly  owned
Subsidiary of ILCO to its parent);

                                      -39-

<PAGE>


     (b) amend its Articles of Incorporation, Bylaws or other comparable charter
or organizational documents;

     (c) acquire any business (including the assets thereof) or any corporation,
partnership,  joint  venture,  association  or other  business  organization  or
division thereof;

     (d) sell, mortgage or otherwise encumber or subject to any Lien (other than
mechanics  liens filed in connection  with the  development  of real property by
Investors NA) or otherwise  dispose of any of its  properties or assets that are
material to ILCO and its subsidiaries, taken as whole;

     (e) (i) other than working  capital  borrowings  in the ordinary  course of
business and consistent with past practices, incur any indebtedness for borrowed
money  or  guarantee  any  such  indebtedness  of  another  person,  other  than
indebtedness  owing to or guarantees of indebtedness owing to ILCO or any of its
direct or indirect wholly-owned  subsidiaries or (ii) make any material loans or
advances  to any  other  person,  other  than to ILCO  or any of its  direct  or
indirect wholly-owned  subsidiaries and other than routine advances to employees
consistent with past practices;

     (f) make any Tax election or settle or compromise  any Tax  liability  that
could reasonably be expected to be material to ILCO and its subsidiaries,  taken
as a whole,  or change its Tax or  accounting  methods,  policies,  practice  or
procedures, except as required by law or GAAP;

     (g) pay, discharge,  settle or satisfy any material claims,  liabilities or
obligations   (absolute,   accrued,   asserted  or  unasserted,   contingent  or
otherwise),  other than the payment, discharge or satisfaction,  in the ordinary
course of business  consistent  with past practice or in  accordance  with their
terms, of liabilities  reflected or reserved against in, or contemplated by, the
most recent  consolidated  financial  statements  (or the notes thereto) of ILCO
included in the ILCO SEC Documents or incurred  since the date of such financial
statements in the ordinary course of business consistent with past practice;

     (h) make any material commitments or agreements for capital expenditures or
capital additions or betterments except as materially consistent with the budget
for  capital  expenditures  as of the date of this  Agreement,  in the  ordinary
course of business consistent with past practices;

     i) except as may be required by law:

          (A) other than in the ordinary  course of business and consistent with
     past practices, make any representation or promise, oral or written, to any
     employee  or former  director,  officer or  employee  of ILCO or any of its
     subsidiaries which is inconsistent with the terms of any ILCO Benefit Plan;

          (B) other than in the ordinary course of business, make any change to,
     or amend in any way, the contracts,  salaries, wages, or other compensation
     of any director,  employee or any agent or consultant of ILCO or any of its
     subsidiaries  other than routine  changes or  amendments  that are required
     under existing contracts;

                                      -40-

<PAGE>


          (C) except for renewals in the ordinary course of business  consistent
     with  past  practices,  adopt,  enter  into,  amend,  alter  or  terminate,
     partially or  completely,  any ILCO  Benefit  Plan,  or any  election  made
     pursuant to the  provisions of any ILCO Benefit  Plan,  to  accelerate  any
     payments, obligations or vesting schedules under any ILCO Benefit Plan; or

          (D) other than in the ordinary course of business consistent with past
     practices, approve any general or company-wide pay increases for employees;

     (j) except in the ordinary course of business,  modify,  amend or terminate
any  material  agreement,  permit,  concession,  franchise,  license  or similar
instrument to which ILCO or any of its subsidiaries is a party or waive, release
or assign any material rights or claims thereunder; or

     (k)  authorize  any of, or commit  or agree to take any of,  the  foregoing
actions.

     6.2 Conduct of Business of FIC.  Except as expressly  contemplated  by this
Agreement,  during the period from the date of this  Agreement to the  Effective
Time,  FIC shall,  and shall cause its  subsidiaries  to, act and carry on their
respective  businesses  in the  ordinary  course of business  and, to the extent
consistent  therewith,  use commercially  reasonable  efforts to preserve intact
their  current  business  organizations,  keep  available  the services of their
current  officers and  employees  and preserve the goodwill of those  engaged in
material business  relationships  with them.  Without limiting the generality of
the  foregoing,  during  the  period  from  the  date of this  Agreement  to the
Effective  Time and except as set forth in the FIC SEC Documents or as set forth
in the FIC  Disclosure  Letter,  FIC shall not,  and shall not permit any of its
subsidiaries  to, without the prior consent of ILCO:

     (a) (i)  declare,  set  aside or pay any  dividends  on,  or make any other
distributions  (whether in cash, stock or property) in respect of, any of its or
its subsidiaries'  outstanding capital stock (except dividends and distributions
by a direct or indirect  wholly owned  subsidiary  of FIC to its  parent),  (ii)
split,  combine or reclassify any of its  outstanding  capital stock or issue or
authorize  the issuance of any other  securities in respect of, in lieu of or in
substitution  for  shares of its  outstanding  capital  stock,  (iii)  except in
connection  with the  termination of the employment of any employees,  purchase,
redeem or  otherwise  acquire  any shares of  outstanding  capital  stock or any
rights,  warrants or options to acquire any such  shares,  or (iv) issue,  sell,
grant,  pledge or otherwise  encumber any shares of its capital stock, any other
equity securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, equity securities or convertible securities
(other than (A) upon the exercise of FIC Stock Options  outstanding  on the date
of this  Agreement or issued under clause (C) below,  (B) pursuant to employment
agreements  or other  contractual  arrangements  in  effect  on the date of this
Agreement  and (C)  issuances  of stock of any direct or indirect  wholly  owned
Subsidiary of FIC to its parent);

                                      -41-

<PAGE>


               (b)  amend  its  Articles  of  Incorporation,   Bylaws  or  other
          comparable  charter  or  organizational  documents;

               (c) acquire any business  (including  the assets  thereof) or any
          corporation, partnership, joint venture, association or other business
          organization  or division  thereof;

               (d) sell,  mortgage or otherwise  encumber or subject to any Lien
          or  otherwise  dispose  of any of its  properties  or assets  that are
          material to FIC and its subsidiaries, taken as whole;

               (e) (i) other than  working  capital  borrowings  in the ordinary
          course of  business  and  consistent  with past  practices,  incur any
          indebtedness for borrowed money or guarantee any such  indebtedness of
          another  person,  other than  indebtedness  owing to or  guarantees of
          indebtedness   owing  to  FIC  or  any  of  its  direct  or   indirect
          wholly-owned  subsidiaries or (ii) make any material loans or advances
          to any  other  person,  other  than  to FIC  or any of its  direct  or
          indirect wholly-owned  subsidiaries and other than routine advances to
          employees consistent with past practices;

               (f)  make  any Tax  election  or  settle  or  compromise  any Tax
          liability that could  reasonably be expected to be material to FIC and
          its  subsidiaries,  taken as a whole,  or change its Tax or accounting
          methods, policies,  practice or procedures,  except as required by law
          or GAAP;

               (g) pay,  discharge,  settle  or  satisfy  any  material  claims,
          liabilities or obligations (absolute, accrued, asserted or unasserted,
          contingent  or  otherwise),  other  than  the  payment,  discharge  or
          satisfaction,  in the ordinary course of business consistent with past
          practice or in accordance with their terms,  of liabilities  reflected
          or  reserved   against  in,  or  contemplated   by,  the  most  recent
          consolidated  financial  statements  (or  the  notes  thereto)  of FIC
          included in the FIC SEC  Documents or incurred  since the date of such
          financial  statements  in the ordinary  course of business  consistent
          with past practice;

               (h) make any  material  commitments  or  agreements  for  capital
          expenditures or capital additions or betterments  except as materially
          consistent with the budget for capital  expenditures as of the date of
          this  Agreement,  in the ordinary  course of business  consistent with
          past practices;

               (i) except as may be required by law:

                    (A)  other  than in the  ordinary  course  of  business  and
               consistent  with  past  practices,  make  any  representation  or
               promise,  oral or written,  to any  employee or former  director,
               officer or  employee of FIC or any of its  subsidiaries  which is
               inconsistent with the terms of any FIC Benefit Plan;

                    (B) other than in the ordinary course of business,  make any
               change to, or amend in any way, the contracts,  salaries,  wages,
               or other  compensation of any director,  employee or any agent or
               consultant of ILCO or any of its subsidiaries  other than routine
               changes or amendments that are required under existing contracts;

                                      -42-

<PAGE>

                    (C) except for renewals in the  ordinary  course of business
               consistent with past practices,  adopt,  enter into, amend, alter
               or terminate,  partially or completely,  any FIC Benefit Plan, or
               any election made  pursuant to the  provisions of any FIC Benefit
               Plan,  to  accelerate   any  payments,   obligations  or  vesting
               schedules under any FIC Benefit Plan; or

                    (D) other than in the ordinary course of business consistent
               with past  practices,  approve  any general or  company-wide  pay
               increases for employees;

     (j) except in the ordinary course of business,  modify,  amend or terminate
any  material  agreement,  permit,  concession,  franchise,  license  or similar
instrument to which FIC or any of its subsidiaries is a party or waive,  release
or assign any material rights or claims thereunder; or

     (k)  authorize  any of, or commit  or agree to take any of,  the  foregoing
actions.

     6.3 Stock Options.  (a) At the Effective  Time, each ILCO Stock Option that
is outstanding and unexercised  immediately prior to the Effective Time shall be
deemed to have been assumed by FIC, without further action by FIC, the Surviving
Corporation or the holders of such options, and shall thereafter be deemed to be
an option  to  acquire  shares of FIC  Common  Stock in such  amount  and at the
exercise price provided below and otherwise having the same terms and conditions
as are in effect  immediately  prior to the Effective Time (except to the extent
that such terms and conditions may be altered in accordance  with their terms as
a result of the  transactions  contemplated  hereby)  (such ILCO  Stock  Options
assumed by FIC being the "Assumed Stock Options"):

          (i) the number of shares of FIC Common  Stock to be subject to the new
     option  shall be equal to the  product  of (x) the number of shares of ILCO
     Common  Stock  subject to the original  option and (y) the  Exchange  Ratio
     (rounded  to the nearest  1/100 of a share);

          (ii) the  exercise  price per share of FIC Common  Stock under the new
     option  shall be equal to (x) the  exercise  price per share of ILCO Common
     Stock under the original  option divided by (y) the Exchange Ratio (rounded
     to the nearest $0.01); and

          (iii) in accordance with the terms of the ILCO Stock Option Plan under
     which the ILCO Stock Options were issued,  fractional shares of any Assumed
     Stock  Options  resulting  from the  adjustments  set forth in this Section
     6.3(a) shall be eliminated.

     (b) At the  Effective  Time,  FIC shall  assume the ILCO Stock Option Plan,
with such changes thereto as may be necessary to reflect the consummation of the
transactions  contemplated  hereby.  Nothing  in this  Section  6.3(b)  shall be
construed  to prevent FIC in any way from  terminating  or freezing the benefits
under any such plans  (subject to the rights of the holders of the Assumed Stock
Options thereunder) and adopting one or more new stock option plans, as approved
by the Board of Directors of FIC following the Effective Time.

     (c) Promptly  following the Effective Time, FIC shall use its  commercially
reasonable efforts to file with the SEC a Registration Statement on Form S-8 (or
an  amendment  to any such  form of FIC  currently  on file with the SEC that is
available  therefor) (the "Form S- 8") for the purpose of registering the shares
of FIC Common Stock issuable upon the exercise of the Assumed Stock Options, and
FIC shall use its commercially  reasonable  efforts to have the Form S-8 (or any
post-effective amendment thereto) declared effective under the Securities Act as
soon as practicable after such filing.

                                      -43-

<PAGE>


     6.4 Other Actions.  Subject to Section 5.5(b),  neither FIC nor ILCO shall,
and neither of them shall permit any of their  respective  subsidiaries to, take
any action that would, or that could  reasonably be expected to, (a) prevent the
Merger from qualifying as a reorganization  within the meaning of Section 368(a)
of the Code or (b) otherwise  result in any of the  conditions of the Merger set
forth in Article VII not being satisfied.

                        ARTICLE VII CONDITIONS PRECEDENT

     7.1  Conditions  to Each  Party's  Obligation  to Effect  the  Merger.  The
respective  obligation  of each  party to effect  the  Merger is  subject to the
satisfaction  or  waiver  on or  prior  to the  Closing  Date  of the  following
conditions:

          (a)  Shareholder  Approval.  The ILCO  Shareholders  Approval  and FIC
     Shareholders Approval shall have been obtained.

          (b)  Governmental  and  Regulatory  Consents.  All required  consents,
     approvals,  permits and  authorizations  to the  consummation of the Merger
     shall be obtained from any  Governmental  Entity whose  consent,  approval,
     permission or  authorization is required by reason of a change in law after
     the date of this  Agreement,  unless the  failure to obtain  such  consent,
     approval,  permission or authorization  could not reasonably be expected to
     have an ILCO Material Adverse Effect, or to materially and adversely affect
     the validity or  enforceability  of this  Agreement or the Merger.

          (c) HSR Act. The waiting period (and any extension thereof) applicable
     to the Merger  under the HSR Act shall have been  terminated  or shall have
     otherwise expired.

          (d) No  Injunctions  or Restraints.  No temporary  restraining  order,
     preliminary  or permanent  injunction or other order issued by any court of
     competent  jurisdiction or other legal restraint or prohibition  preventing
     the consummation of the Merger shall be in effect; provided,  however, that
     the party invoking this  condition  shall use its  commercially  reasonable
     efforts to have any such order or injunction vacated.

          (e) Nasdaq Listing.  The shares of FIC Common Stock issuable  pursuant
     to the Merger shall have been  approved  for  quotation in the Nasdaq Stock
     Market's Small Cap Market.

          (f) Form  S-4.  The Form S-4 shall  have  become  effective  under the
     Securities  Act  and  shall  not  be  the  subject  of any  stop  order  or
     proceedings seeking a stop order.

                                      -44-

<PAGE>

     7.2 Conditions to Obligations of ILCO. The obligation of ILCO to effect the
Merger is further subject to the following conditions:

          (a) Representations and Warranties. The representations and warranties
     of FIC and Merger Sub contained in this Agreement  shall have been true and
     correct on the date of this  Agreement and shall be true and correct at and
     as of the Closing Date as though made at and as of such time (except to the
     extent that any such  representations and warranties  expressly relate only
     to an earlier  time, in which case they shall have been true and correct at
     such earlier time); provided,  however, that this condition shall be deemed
     to have been  satisfied  unless the  individual or aggregate  impact of all
     inaccuracies of such  representations and warranties (without regard to any
     materiality or FIC Material  Adverse Effect  qualifier(s)  contained in any
     individual representation or warranty) could reasonably be expected to have
     a material adverse effect on the condition  (financial or otherwise) of FIC
     and its subsidiaries,  considered as a whole, and except to the extent that
     any  inaccuracies  of such  representations  and warranties are a result of
     changes in the United States  financial  markets  generally or in national,
     regional or local economic conditions generally, or are a result of matters
     arising after the date hereof that affect the insurance industry generally.
     FIC and Merger Sub shall each have delivered to ILCO a certificate dated as
     of the Closing Date, signed by a senior executive officer of FIC and Merger
     Sub, to the effect set forth in this Section 7.2(a).

          (b)  Performance of Obligations of FIC and Merger Sub. Each of FIC and
     Merger Sub shall have  performed in all material  respects all  obligations
     required  to be  performed  by it under this  Agreement  at or prior to the
     Closing Date,  and ILCO shall have received a certificate  signed on behalf
     of each of FIC and Merger Sub by a senior executive officer to such effect.

          (c) Tax  Opinion.  ILCO shall have  received an opinion of Fulbright &
     Jaworski  L.L.P.,  dated as of the Closing Date, to the effect that (i) the
     Merger will constitute a  reorganization  under Section 368(a) of the Code,
     (ii) FIC,  Merger  Sub and ILCO will each be a party to the  reorganization
     under  Section  368(b)  of the  Code,  and  (iii)  no gain or loss  will be
     recognized by the shareholders of ILCO upon the receipt of FIC Common Stock
     in  exchange  for ILCO  Common  Stock  pursuant  to the Merger  except with
     respect to any cash  received in lieu of  Fractional  Shares.  In rendering
     such opinion,  Fulbright & Jaworski L.L.P.  shall receive and may rely upon
     representations,  contained in  certificates  of FIC,  Merger Sub and ILCO,
     that are standard for tax-free reorganizations similar to the Merger.

          (d) Fairness  Opinion.  The ILCO Fairness  Opinion shall not have been
     modified,  withdrawn  or  revoked as of the date and time of mailing of the
     Joint Proxy Statement/Prospectus to the shareholders of ILCO.

          (e)  Consent.  FIC shall have  obtained the consent or approval of any
     person required under any FIC Material Contract,  if any, to consummate the
     transactions contemplated by this Agreement.

          (f) No Material  Adverse  Change.  There shall not have  occurred  any
     change in the business of FIC and its  subsidiaries  since the date of this
     Agreement  or any other  event or  circumstance  that could  reasonably  be
     expected to have an FIC Material Adverse Effect.

                                      -45-

<PAGE>

     7.3 Conditions to Obligations of FIC. The obligations of FIC and Merger Sub
to effect the Merger are further subject to the following conditions:

          (a) Representations and Warranties. The representations and warranties
     of ILCO contained in this Agreement shall have been true and correct on the
     date of this  Agreement  and  shall  be true and  correct  at and as of the
     Closing  Date as though  made at and as of such time  (except to the extent
     that any such  representations  and warranties  expressly relate only to an
     earlier  time,  in which case they shall have been true and correct at such
     earlier time);  provided,  however,  that this condition shall be deemed to
     have been  satisfied  unless  the  individual  or  aggregate  impact of all
     inaccuracies of such  representations and warranties (without regard to any
     materiality or ILCO Material Adverse Effect  qualifier(s)  contained in any
     individual representation or warranty) could reasonably be expected to have
     a material adverse effect on the condition (financial or otherwise) of ILCO
     (or,  following the Effective  Time,  the  Surviving  Corporation)  and its
     subsidiaries,  considered  as a whole,  and except to the  extent  that any
     inaccuracies of such representations and warranties are a result of changes
     in the United States financial markets  generally or in national,  regional
     or local economic conditions generally,  or are a result of matters arising
     after the date hereof that affect the insurance  industry  generally.  ILCO
     shall have  delivered to FIC and Merger Sub a  certificate  dated as of the
     Closing Date,  signed by a senior executive  officer of ILCO, to the effect
     set forth in this Section 7.3(a).

          (b)  Performance of Obligations of ILCO.  ILCO shall have performed in
     all material respects all obligations  required to be performed by it under
     this  Agreement  at or prior to the  Closing  Date,  and FIC and Merger Sub
     shall  have  received  a  certificate  signed on behalf of ILCO by a senior
     executive officer of ILCO to such effect.


          (c) Tax Opinion. FIC shall have received an opinion of Weil, Gotshal &
     Manges LLP, dated as of the Closing Date, to the effect that (i) the Merger
     will  constitute a  reorganization  under Section 368(a) of the Code,  (ii)
     FIC, Merger Sub and ILCO will each be a party to the  reorganization  under
     Section 368(b) of the Code, and (iii) no gain or loss will be recognized by
     FIC, Merger Sub or ILCO by reason of the Merger. In rendering such opinion,
     Weil, Gotshal & Manges LLP shall receive and may rely upon representations,
     contained in  certificates  of FIC,  Merger Sub and ILCO, that are standard
     for tax-free reorganizations similar to the Merger.

          (d) Consents.  ILCO shall have obtained the consent or approval of any
     person  required  under any Material  Contract,  if any, to consummate  the
     transactions contemplated by this Agreement.

          (e) Fairness  Opinion.  The FIC Fairness  Opinion  shall not have been
     modified,  withdrawn  or  revoked as of the date and time of mailing of the
     Joint Proxy Statement/Prospectus to the shareholders of FIC.

          (f) Investors-NA Option Agreement. FIC shall have received an executed
     copy of the amendment to the Investors-NA Option Agreement, as described in
     Section 5.12, and such  agreement,  as amended,  shall be in full force and
     effect.


                                      -46-

<PAGE>


          (g) No Material  Adverse  Change.  There shall not have  occurred  any
     change in the business of ILCO and its subsidiaries  since the date of this
     Agreement  or any other  event or  circumstance  that could  reasonably  be
     expected to have an ILCO Material Adverse Effect.

                      ARTICLE VIII TERMINATION, AMENDMENT
                                   AND WAIVER

8.1  Termination.  This Agreement may be terminated and the
          Merger  abandoned as follows:

     (a) at any time  prior  to the  Effective  Time,  whether  before  or after
approval of this Agreement and the Merger by the shareholders of ILCO or FIC, by
mutual written consent of FIC and ILCO;

     (b) at any time  prior  to the  Effective  Time,  whether  before  or after
approval of this Agreement and the Merger by the shareholders of ILCO or FIC:

               (i) by FIC or ILCO if the ILCO  Shareholders  Approval  shall not
          have been obtained after  submission by the Board of Directors of ILCO
          of this Agreement and the Merger for approval by the  shareholders  of
          ILCO at a  special  meeting  called  for such  purpose  or by  written
          consent of such shareholders in accordance with Section 5.2(a);

               (ii) by FIC or ILCO if the FIC  Shareholders  Approval  shall not
          have been obtained  after  submission by the Board of Directors of FIC
          of the  issuance  of shares of FIC Common  Stock in the Merger and the
          Charter Amendment for approval by the common  shareholders of FIC at a
          special  meeting  called for such purpose in  accordance  with Section
          5.2(b);

               (iii)  by  FIC  or  ILCO  if  the  Merger  shall  not  have  been
          consummated  on  or  before  June  1,  2001,  unless  the  failure  to
          consummate  the Merger is the result of a willful and material  breach
          of this Agreement by the party seeking to terminate this Agreement;

               (iv) by FIC or ILCO if any Governmental  Entity shall have issued
          an order,  decree or  ruling  or taken  any other  action  permanently
          enjoining,  restraining or otherwise  prohibiting  the Merger and such
          order,  decree,  ruling or other  action  shall have become  final and
          nonappealable;

               (v) by FIC or ILCO in the event of a breach by the other party of
          any representation, warranty, covenant or other agreement contained in
          this Agreement which (A) would give rise to the failure of a condition
          set forth in  Section  7.2(a)  or (b) or  Section  7.3(a)  or (b),  as
          applicable,  and (B)  cannot be or has not been  cured  within 30 days
          after the  giving of  written  notice to the  breaching  party of such
          breach (a "Material  Breach"),  provided that the terminating party is
          not then in Material Breach of any representation,  warranty, covenant
          or other agreement contained in this Agreement;

                                      -47-

<PAGE>

               (vi) by FIC if ILCO  shall  have  breached  the  requirements  of
          Section  5.5  hereof,  unless  FIC shall at such  time be in  Material
          Breach of any  representation,  warranty,  covenant or other agreement
          contained in this Agreement; or

               (vii) by ILCO if a third  party  shall  have made an  Acquisition
          Proposal  that is a  Superior  Proposal  and the  Company  shall  have
          concurrently  executed a definitive agreement with such third party in
          respect of such Superior Proposal.


     8.2 Effect of  Termination.  (a) In the event  that FIC or ILCO  terminates
this Agreement as provided in Section 8.1(a), 8.1(b)(i), 8.1(b)(ii), 8.1(b)(iii)
or 8.1(b)(iv),  this Agreement shall  forthwith  become void and have no effect,
without any liability or  obligation on the part of FIC or ILCO,  other than the
last sentence of Section 5.3 and Sections 2.9,  3.8,  5.9, 8.2,  10.1,  11.2 and
11.8.

          (b) In the event that this  Agreement is terminated by FIC pursuant to
     Section 8.1 (b)(vi) or by ILCO pursuant to Section 8.1(b)(vii),  ILCO shall
     promptly  reimburse  FIC  for all  substantiated  out-of-pocket  costs  and
     expenses  incurred  by them  in  connection  with  this  Agreement  and the
     transactions contemplated hereby, including,  without limitation, costs and
     expenses of accountants,  attorneys and financial advisors.  This Agreement
     shall  not be deemed to have been  validly  terminated  until all  payments
     contemplated by this Section 8.2(b) shall have been made in full.

          (c) In the event that this  Agreement is  terminated  by either FIC or
     ILCO  pursuant  to  Section  8.1(b)(v),  the  non-breaching  party may seek
     damages or any other appropriate remedy in law or in equity.

     8.3 Amendment.  Subject to the applicable  provisions of the Texas Code, at
any time prior to the  Effective  Time,  the parties  hereto may modify or amend
this Agreement,  by written agreement  executed and delivered by duly authorized
officers  of the  respective  parties;  provided,  however,  that after the ILCO
Shareholders  Approval  has been  obtained,  no  amendment  shall be made  which
reduces the consideration  payable in the Merger or adversely affects the rights
of ILCO's shareholders hereunder without the approval of such shareholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties.

     8.4 Extension;  Consent;  Waiver.  At any time prior to the Effective Time,
the  parties  may  (a)  extend  the  time  for  the  performance  of  any of the
obligations or other acts of the other parties,  (b) waive any  inaccuracies  in
the  representations  and  warranties  of the other  parties  contained  in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to Section 8.3, waive compliance with any of the agreements or conditions of the
other  parties  contained in this  Agreement or consent to any action  requiring
consent pursuant to this Agreement.  Any agreement on the part of a party to any
such  extension,  waiver  or  consent  shall  be valid  only if set  forth in an
instrument in writing  signed on behalf of such party.  The failure of any party
to this  Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.

                                      -48-

<PAGE>


     8.5 Procedure for Termination,  Amendment,  Extension, Consent or Waiver. A
termination  of this  Agreement  pursuant to Section  8.1, an  amendment of this
Agreement pursuant to Section 8.3 or an extension, consent or waiver pursuant to
Section 8.4 shall, in order to be effective, require in the case of FIC or ILCO,
action by its Board of Directors or a duly authorized  committee of its Board of
Directors.

                       ARTICLE IX SURVIVAL OF PROVISIONS

     9.1 Survival.  The  representations  and warranties of FIC,  Merger Sub and
ILCO made in this Agreement, or in any certificate,  respectively,  delivered by
any of them pursuant to this Agreement, will not survive the Closing.
ARTICLE X NOTICES

     10.1 Notices.  All notices and other  communications  under this  Agreement
must be in  writing  and will be deemed to have  been duly  given if  delivered,
telecopied or mailed, by certified mail, return receipt  requested,  first-class
postage prepaid, to the parties at the following addresses:

     If to FIC or Merger Sub, to:

                Financial  Industries  Corporation
                6500 River Place Blvd., Building One
                Austin,  Texas 78730
                Attention:  James M. Grace
                Facsimile:  (512) 404-5051

        with  copies to:

                Weil,  Gotshal & Manges  LLP
                100  Crescent Court,  Suite  1300
                Dallas,  Texas  75201
                Attention:  Glenn D.  West
                Facsimile:  (214)  746-7777

        If to  ILCO,  to:

                InterContinental  Life  Corporation
                6500 River Place Blvd.,  Building One
                Austin,  Texas 78730
                Attention:  Theodore A. Fleron
                Facsimile:  (512) 404-5051

                                      -49-

<PAGE>

        with a copy to:

                Fulbright & Jaworski,  L.L.P.
                600  Congress  Avenue,  Suite 2400
                Austin,  Texas 78701
                Attention:  Walter Earl Bissex
                Facsimile:  (512) 536-4598

All notices and other communications  required or permitted under this Agreement
that are addressed as provided in this Article X will, if delivered  personally,
be deemed  given upon  delivery,  will,  if  delivered  by  telecopy,  be deemed
delivered when confirmed and will, if delivered by mail in the manner  described
above,  be deemed given on the third  business day after the day it is deposited
in a regular  depository of the United States mail.  Any party from time to time
may  change  its  address  for the  purpose of notices to that party by giving a
similar  notice  specifying a new address,  but no such notice will be deemed to
have been given until it is actually  received by the party sought to be charged
with the contents thereof.

                                   ARTICLE XI
                                  MISCELLANEOUS

     11.1 Entire Agreement. Except for the documents executed by FIC, Merger Sub
and ILCO pursuant hereto,  this Agreement  supersedes all prior  discussions and
agreements  between  the  parties  with  respect to the  subject  matter of this
Agreement, and this Agreement (including the exhibits hereto and other documents
delivered in connection herewith) contains the sole and entire agreement between
the parties hereto with respect to the subject matter hereof.

     11.2 Expenses. Except as provided in Section 8.2, whether or not the Merger
is  consummated,  each of FIC,  Merger  Sub and ILCO  will pay its own costs and
expenses  incident  to  preparing  for,  entering  into  and  carrying  out this
Agreement and the consummation of the transactions  contemplated  hereby. In the
event of any lawsuit or other  judicial  proceeding  brought by either  party to
enforce  any of the  provisions  of this  Agreement,  the  losing  party in such
proceeding shall reimburse the prevailing  party's fees and expenses incurred in
connection therewith, including the fees and expenses of its attorneys.

     11.3  Counterparts.   This  Agreement  may  be  executed  in  two  or  more
counterparts,  each of which will be deemed an  original,  but all of which will
constitute one and the same  instrument  and shall become  effective when one or
more  counterparts  have been signed by each of the parties and delivered to the
other parties.

     11.4 No Third  Party  Beneficiary.  Except for Section  5.9,  the terms and
provisions of this Agreement are intended  solely for the benefit of the parties
hereto, and their respective  successors or assigns, and it is not the intention
of the parties to confer third-party beneficiary rights upon any other person.

     11.5 Governing  Law. This  Agreement  shall be governed by and construed in
accordance  with the laws of the  State of  Texas,  regardless  of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.

                                      -50-

<PAGE>



     11.6  Assignment;  Binding  Effect.  Neither this  Agreement nor any of the
rights,  interests or  obligations  under this Agreement  shall be assigned,  in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties,  and any such assignment that is
not consented to shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon,  inure to the benefit of and be enforceable  by,
the parties and their respective successors and assigns.

     11.7 Headings,  Gender,  Etc. The headings used in this Agreement have been
inserted  for  convenience  and do not  constitute  matter  to be  construed  or
interpreted  in  connection  with this  Agreement.  Unless  the  context of this
Agreement otherwise requires, (a) words of any gender are deemed to include each
other  gender;  (b) words using the  singular or plural  number also include the
plural or  singular  number,  respectively;  (c) the terms  "hereof,"  "herein,"
"hereby,"  "hereto,"  and  derivative  or  similar  words  refer to this  entire
Agreement;  (d) the terms "Article" or "Section" refer to the specified  Article
or Section of this  Agreement;  (e) all  references to "dollars" or "$" refer to
currency of the United States of America;  (f) the term  "person"  shall include
any natural person, corporation, limited liability company, general partnership,
limited  partnership,  or  other  entity,  enterprise,   authority  or  business
organization; and (g) the term "or" is not exclusive.

     11.8 Invalid  Provisions.  If any provision of this Agreement is held to be
illegal,  invalid,  or unenforceable under any present or future law, and if the
rights or obligations  of ILCO,  Merger Sub or FIC under this Agreement will not
be materially and adversely  affected thereby,  (a) such provision will be fully
severable; (b) this Agreement will be construed and enforced as if such illegal,
invalid,  or unenforceable  provision had never comprised a part hereof; and (c)
the remaining  provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal,  invalid, or unenforceable provision or
by its severance herefrom.

     11.9 No  Recourse  Against  Others.  No past,  present or future  director,
officer, employee, shareholder, incorporator or partner, as such, of FIC, Merger
Sub,  ILCO  or the  Surviving  Corporation  shall  have  any  liability  for any
obligations  of FIC,  Merger Sub, ILCO or the Surviving  Corporation  under this
Agreement  or for any  claim  based  on,  in  respect  of or by  reason  of such
obligations or their creation.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                      -51-

<PAGE>

     IN WITNESS WHEREOF,  this Agreement has been duly executed and delivered by
the duly  authorized  officers of FIC,  Merger Sub and ILCO  effective as of the
date first written above.


FINANCIAL INDUSTRIES CORPORATION

By:    /s/ Roy F. Mitte
Name: Roy F. Mitte
Title:  Chairman, President and
Chief Executive Officer

ILCO ACQUISITION COMPANY
By:    /s/ Roy F. Mitte
Name: Roy F. Mitte
Title:   President


INTERCONTINENTAL LIFE CORPORATION


By:    /s/ Roy F. Mitte
Name: Roy F. Mitte
Title:  Chairman, President and Chief Executive Officer



                                      -52-

<PAGE>


                                    Annex I


                             ARTICLES OF AMENDMENT
                                       TO
                           ARTICLES OF INCORPORATION
                                       OF
                        FINANCIAL INDUSTRIES CORPORATION


        The undersigned, Mr. Roy F. Mitte and Mr. James M. Grace, certify that:

          1. They are the President and  Secretary,  respectively,  of Financial
     Industries Corporation (the "Corporation").

          2. At a duly held  Special  Meeting of the Board of  Directors  of the
     Corporation,  held on _______,  2001,  the Board of  Directors  adopted the
     following  resolution  approving the following amendment to the Articles of
     Incorporation of the Corporation:

          Paragraph 1 of Article IV is amended to read as follows:

               "The aggregate number of shares which the Corporation  shall have
          the authority to issue is twenty-five  million  (25,000,000) shares of
          common stock,  par value $0.20 per share."

          3. The  shareholders of the Corporation  adopted and approved the same
     amendment  by  resolution  at a special  meeting held at the offices of the
     Corporation in Austin,  Texas,  on ________,  2001, by the required vote of
     shareholders as prescribed by Article VII of the Corporation's  Articles of
     Incorporation and Articles 4.02 and 2.28 of the Texas Business  Corporation
     Act.

          4. The number of shares outstanding is _________. The number of shares
     entitled to vote on or consent to the amendment is __________.

          5. The number of shares voted in favor of the  amendment  was _______,
     or _____%,  which  exceeded the required  vote,  which is a majority  under
     Article VII of the Corporation's  Articles of Incorporation.  The number of
     shares voted against was _____.

          6. The  undersigned  have  executed  these  Articles of Amendment  and
     affixed the corporate seal on ________, 2001.


      __________________________                      ________________________
      Roy F. Mitte, President                         James M. Grace, Secretary


                                      -53-

<PAGE>


                                   Exhibit A


                                _________, 2001

Financial Industries Corporation
6500 River Place Blvd., Building One
Austin, Texas  78730

Ladies and Gentlemen:

     Reference is made to the  provisions  of the  Agreement and Plan of Merger,
dated as of January ___, 2001 (together with any amendments thereto, the "Merger
Agreement"),  among InterContinental Life Corporation,  a Texas corporation (the
"Company"),  Financial Industries  Corporation,  a Texas corporation ("Parent"),
and ILCO Acquisition  Company, a Texas corporation and a wholly owned subsidiary
of Parent ("Merger  Sub"),  pursuant to which Merger Sub will be merged with and
into the Company,  with the Company continuing as the surviving corporation (the
"Merger").   This  letter   constitutes  the  undertakings  of  the  undersigned
contemplated by the Merger Agreement, and is being furnished pursuant to Section
5.7 thereto.

     I understand  that I may be deemed to be an "affiliate" of the Company,  as
such term is defined for purposes of  paragraphs  (c) and (d) of Rule 145 ("Rule
145")  promulgated under the Securities Act of 1933, as amended (the "Securities
Act").  Execution  of this letter  shall not be  construed  as an  admission  of
"affiliate"  status nor as a waiver of any  rights  that I may have to object to
any claim that I am an "affiliate" on or after the date of this letter.

     If in  fact I were  to be  deemed  an  "affiliate"  of  the  Company  under
paragraphs  (c) and (d) of Rule 145, my ability to sell,  transfer or  otherwise
dispose of any shares of the common stock,  par value $0.20 per share, of Parent
(the "Parent  Shares")  received by me in exchange for any shares of ILCO Common
Stock (as  defined in the Merger  Agreement)  pursuant to the Merger or received
upon the exercise of any stock options may be restricted.

     I hereby  represent,  warrant and  covenant to Parent that I will not sell,
pledge,  transfer,  or otherwise  dispose of any of the Parent Shares except (i)
pursuant to an effective  registration  statement  under the Securities  Act, or
(ii) as permitted by, and in  accordance  with,  Rule 145 or another  applicable
exemption  under the  Securities Act and the rules and  regulations  promulgated
thereunder.

     I hereby  acknowledge  that,  except as  otherwise  provided  in the Merger
Agreement, Parent is under no obligation to register the sale, transfer, pledge,
or other  disposition of the Parent Shares or to take any other action necessary
for the purpose of making an exemption from registration available.

                                      -54-

<PAGE>



     I  understand  that Parent  will issue stop  transfer  instructions  to its
transfer agents with respect to the Parent Shares and that a restrictive  legend
will be placed on  certificates  delivered to me evidencing the Parent Shares in
substantially the following form:

          This  certificate and the shares  represented  hereby have been issued
          pursuant  to  a   transaction   governed  by  Rule  145  ("Rule  145")
          promulgated  under  the  Securities  Act  of  1933,  as  amended  (the
          "Securities Act"), and may not be sold or otherwise disposed of unless
          registered  under  the  Securities  Act  pursuant  to  a  Registration
          Statement  in  effect  at the  time or  unless  the  proposed  sale or
          disposition  can be  made  in  compliance  with  Rule  145 or  without
          registration in reliance on another exemption therefrom.


     The term Parent  Shares as used in this  letter  shall mean and include not
only the common  stock of Parent as  presently  constituted,  but also any other
stock which may be issued in exchange for, in lieu of, or in addition to, all or
any part of such Parent Shares.

     I agree that, from time to time, at Parent's reasonable request and without
further consideration, I shall execute and deliver such additional documents and
shall use my reasonable  best efforts to take all such further  lawful action as
may be reasonably  necessary or desirable to consummate and make  effective,  in
the most expeditious manner  practicable,  the transactions  contemplated by the
Merger Agreement.

                                        Very truly yours,


                                        Name:



                                      -55-

<PAGE>



                          AGREEMENT AND PLAN OF MERGER
                                     AMONG
                       FINANCIAL INDUSTRIES CORPORATION,
                            ILCO ACQUISITION COMPANY
                                      AND
                       INTERCONTINENTAL LIFE CORPORATION






                          Dated as of January 17, 2001

Article I       THE MERGER....................................................2
1.1     The Merger............................................................2
1.2     Closing...............................................................2
1.3     Effective Time........................................................2
1.4     Articles of Incorporation.............................................2
1.5     Bylaws................................................................3
1.6     Directors.............................................................3
1.7     Officers..............................................................3
1.8     Effect on ILCO Capital Stock..........................................3
        (a)     Outstanding ILCO Common Stock.................................3
        (b)     Treasury Shares; FIC-Owned Shares.............................3
        (c)     Impact of Stock Splits, etc...................................4
1.9     Effect on FIC Capital Stock...........................................4
1.10    Effect on Merger Sub Capital Stock....................................4
1.11    Exchange of Certificates..............................................4
        (a)     Paying Agent..................................................4
        (b)     Exchange Procedures...........................................4
        (c)     Letter of Transmittal.........................................5
        (d)     Distributions with Respect to Unexchanged Shares..............5
        (e)     No Further Ownership Rights in ILCO Common Stock..............5
        (f)     No Fractional Shares..........................................6
        (g)     Termination of Payment Fund...................................6
        (h)     No Liability..................................................6
        (i)     Withholding of Tax............................................7
Article II      REPRESENTATIONS AND WARRANTIES OF ILCO........................7
2.1     Organization, Standing and Corporate Power............................7
2.2     Capital Structure.....................................................7
2.3     Authority; Noncontravention...........................................8
2.4     ILCO SEC Documents; Financial Statements..............................9
2.5     Absence of Certain Changes or Events.................................10
2.6     No Extraordinary Payments or Change in Benefits......................11

                                      -56-

<PAGE>

2.7     Voting Requirements..................................................11
2.8     State Takeover Statutes..............................................11
2.9     Brokers..............................................................11
2.10    Compliance with Applicable Laws......................................11
2.11    Absence of Undisclosed Liabilities...................................11
2.12    Litigation...........................................................12
2.13    Transactions with Affiliates.........................................12
2.14    Labor Matters........................................................12
2.15    Employee Arrangements and Benefit Plans..............................12
2.16    Tax Matters..........................................................13
2.17    Intellectual Property................................................15
2.18    Environmental Matters................................................16
2.19    Material Contracts...................................................17
2.20    Tangible Property....................................................17
2.21    Fairness Opinion.....................................................17
2.22    Insurance Business...................................................18
2.23    Liabilities and Reserves.............................................19
2.24    ILCO Broker/Dealers..................................................19
Article III     REPRESENTATIONS AND WARRANTIES OF FIC........................20
3.1     Organization, Standing and Corporate Power...........................20
3.2     Capital Structure....................................................20
3.3     Authority; Noncontravention..........................................21
3.4     FIC SEC Documents....................................................22
3.5     Absence of Certain Changes or Events.................................23
3.6     No Extraordinary Payments or Change in Benefits......................23
3.7     Voting Requirements..................................................24
3.8     Brokers..............................................................24
3.9     Fairness Opinion.....................................................24
3.10    Compliance with Applicable Laws......................................24
3.11    Absence of Undisclosed Liabilities...................................24
3.12    Litigation...........................................................25

                                      -57-

<PAGE>


3.13    Transactions with Affiliates.........................................25
3.14    FIC Common Stock.....................................................25
3.15    Employee Arrangements and Benefit Plans..............................25
3.16    Tax Matters..........................................................25
3.17    Intellectual Property................................................26
3.18    Environmental Matters................................................28
3.19    State Takeover Statutes..............................................28
3.20    Labor Matters........................................................29
3.21    Material Contracts...................................................29
3.22    Tangible Property....................................................29
3.23    Insurance Business...................................................29
3.24    Liabilities and Reserves.............................................30
Article IV      REPRESENTATIONS AND WARRANTIES OF MERGER SUB.................31
4.1     Organization, Standing and Corporate Power...........................31
4.2     Capital Structure....................................................31
4.3     Authority; Noncontravention..........................................31
4.4     No Prior Activities..................................................32
Article V       ADDITIONAL AGREEMENTS........................................32
5.1     Preparation of Form S-4 and Joint Proxy Statement/Prospectus;
        Information Supplied.................................................32
5.2     Shareholder Approval.................................................33
5.3     Access to Information; Confidentiality...............................34
5.4     Public Announcements.................................................35
5.5     Acquisition Proposals................................................35
5.6     Consents, Approvals and Filings......................................37
5.7     Affiliate Letters....................................................37
5.8     Nasdaq Listing.......................................................37
5.9     INDEMNIFICATION OF OFFICERS AND DIRECTORS............................37
5.10    Letter of FIC's Accountants..........................................38
5.11    Letter of ILCO's Accountants.........................................38
5.12    FIC Stock Option Held by Investors-NA................................39

                                      -58-

<PAGE>
5.13    Vote of Shares of ILCO Common Stock by FIC...........................39
Article VI      COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR
        TO MERGER............................................................39
6.1     Conduct of Business of ILCO..........................................39
6.2     Conduct of Business of FIC...........................................41
6.3     Stock Options........................................................43
6.4     Other Actions........................................................44
Article VII     CONDITIONS PRECEDENT.........................................44
7.1     Conditions to Each Party's Obligation to Effect the Merger...........44
        (a)     Shareholder Approval.........................................44
        (b)     Governmental and Regulatory Consents.........................44
        (c)     HSR Act......................................................44
        (d)     No Injunctions or Restraints.................................44
        (e)     Nasdaq Listing...............................................44
        (f)     Form S-4.....................................................44
7.2     Conditions to Obligations of ILCO....................................45
        (a)     Representations and Warranties...............................45
        (b)     Performance of Obligations of FIC and Merger Sub.............45
        (c)     Tax Opinion..................................................44
        (d)     Fairness Opinion.............................................45
        (e)     Consent......................................................45
        (f)     No Material Adverse Change...................................45
7.3     Conditions to Obligations of FIC.....................................46
        (a)     Representations and Warranties...............................46
        (b)     Performance of Obligations of ILCO...........................46
        (c)     Tax Opinion..................................................46
        (d)     Consents.....................................................46
        (e)     Fairness Opinion.............................................46
        (f)     Investors-NA Option Agreement................................46
        (g)     No Material Adverse Change...................................46
Article VIII    TERMINATION, AMENDMENT AND WAIVER............................47

                                      -59-

<PAGE>

8.1     Termination..........................................................47
8.2     Effect of Termination................................................48
8.3     Amendment............................................................48
8.4     Extension; Consent; Waiver...........................................48
8.5     Procedure for Termination, Amendment, Extension, Consent or Waiver...49
Article IX      SURVIVAL OF PROVISIONS.......................................49
9.1     Survival.............................................................49
Article X       NOTICES......................................................49
10.1    Notices..............................................................49
Article XI      MISCELLANEOUS................................................50
11.1    Entire Agreement.....................................................50
11.2    Expenses.............................................................50
11.3    Counterparts.........................................................50
11.4    No Third Party Beneficiary...........................................50
11.5    Governing Law........................................................50
11.6    Assignment; Binding Effect...........................................51
11.7    Headings, Gender, Etc................................................51
11.8    Invalid Provisions...................................................51
11.9    No Recourse Against Others...........................................51


                                      -60-

<PAGE>


Acquisition Proposal.........................................................36
Actions......................................................................16
Agreement.....................................................................1
Assumed Stock Options........................................................42
Breaches......................................................................9
Closing.......................................................................2
Closing Date..................................................................2
Code..........................................................................1
Effective Time................................................................2
Employment Arrangements......................................................12
Environmental Laws...........................................................16
Environmental Liabilities....................................................16
ERISA........................................................................12
Exchange Act..................................................................9
Exchange Ratio................................................................3
Family Life..................................................................29
FIC...........................................................................1
FIC Acturial Analyses........................................................29
FIC Benefit Plans............................................................23
FIC Common Stock..............................................................1
FIC Disclosure Letter........................................................22
FIC Fairness Opinion.........................................................24
FIC Financial Statements.....................................................22
FIC Material Adverse Effect..................................................20
FIC Material Contracts.......................................................28
FIC SEC Documents............................................................22
FIC Shareholders Approval....................................................21
FIC Shareholders Meeting.....................................................34
FIC Special Committee........................................................24
FIC Stock Options............................................................20
FIC-Owned Shares..............................................................3
Financial Statements..........................................................9
Form S-4.....................................................................32
Form S-8.....................................................................43
Fractional Shares.............................................................6
GAAP..........................................................................9
Governmental Entity...........................................................9
Hazardous Materials..........................................................16
HSR Act.......................................................................9
ILCO..........................................................................1
ILCO Actuarial Analyses......................................................18
ILCO Benefit Plans...........................................................10


                                      -61-

<PAGE>

ILCO Broker/Dealer...........................................................19
ILCO Common Stock.............................................................1
ILCO Disclosure Letter.......................................................10
ILCO Fairness Opinion........................................................17
ILCO Insurance Companies.....................................................17
ILCO Material Adverse Effect..................................................7
ILCO SEC Documents............................................................9
ILCO Shareholders Approval....................................................8
ILCO Special Committee.......................................................17
ILCO Stock Option Plan........................................................7
ILCO Stock Options............................................................7
Indemnified Parties..........................................................37
Indemnified Party............................................................37
Intellectual Property........................................................15
Investors-IN.................................................................17
Investors-NA.................................................................17
Investors-NA Option Agreement................................................38
IRS..........................................................................12
Liens.........................................................................8
Material Breach..............................................................47
Material Contracts...........................................................17
Merger........................................................................2
Merger Consideration..........................................................3
Merger Sub....................................................................1
Paying Agent..................................................................4
Payment Fund..................................................................4
Permits......................................................................11
Potential Acquiror...........................................................35
Proxy Statement/Prospectus...................................................32
Representatives..............................................................34
SEC...........................................................................9
Securities Act................................................................9
Subsidiary....................................................................7
Superior Proposal............................................................36
Surviving Corporation.........................................................2
Tax Return...................................................................15
Taxes........................................................................15
Texas Code....................................................................2
Texas Secretary of State......................................................2
Treasury Shares...............................................................3



                                      -62-

<PAGE>


                                                                    EXHIBIT 99.1

                                      Filed by Financial Industries Corporation
                               pursuant to Rule 425 under the Securities Act of
                                  1933 and deemed filed pursuant to Rule 14a-12
                                        of the Securities Exchange Act of 1934.
                                          Subject Company: Financial Industries
                                        Corporation. Commission File No. 0-4690


FOR IMMEDIATE RELEASE
January 18, 2001

FOR MORE INFORMATION CONTACT
Robert S. Cox
512-404-5128

AUSTIN, TEXAS -- Financial Industries  Corporation (FIC; NASDAQ symbol FNIN) and
InterContinental  Life Corporation (ILCO;  NASDAQ symbol ILCO) jointly announced
today that their  respective  Boards of  Directors  have  approved a  definitive
agreement  whereby FIC would acquire the remaining common shares  (approximately
52%) of  InterContinental  Life  Corporation  which FIC does not currently  own.
Under the terms of the agreement, a newly-established subsidiary of FIC ("Merger
Sub") will be merged with and into ILCO,  with ILCO  continuing as the surviving
entity in the merger transaction as a wholly-owned subsidiary of FIC.

Pursuant to the merger agreement, FIC will issue 1.1 shares of its Common Stock,
$0.20 par value, for each share of ILCO Common Stock,  $0.22 par value, not held
by FIC. The terms of the agreement and the exchange rate were  established  by a
Special  Committee  of the  Board  of  Directors  of each of FIC  and  ILCO  and
recommended to their respective Boards at yesterda's  meeting.  The transaction
is subject to various  conditions  precedent set forth in the merger  agreement,
including the approval of certain matters by the shareholders of FIC and ILCO.

FIC plans to file a  Registration  Statement on Form S-4 in connection  with the
issuance  of shares of its  common  stock in the merger and each of FIC and ILCO
expects  to  mail  a  Joint  Proxy   Statement/Prospectus  to  its  shareholders
containing  information  about  the  merger.  Investors  are  urged  to read the
Registration  Statement  and  Joint  Proxy  Statement/Prospectus  when  they are
available.

                                      -1-

<PAGE>

The  Registration  Statement and Joint Proxy  Statement/Prospectus  will contain
important  information  about FIC,  ILCO,  the merger and  related  matters.  In
addition to the Registration Statement and the Joint Proxy Statement/Prospectus,
FIC and ILCO file annual,  quarterly and other  reports,  proxy  statements  and
other information with the Securities and Exchange Commission ("SEC"). Investors
will be able to obtain  copies of these  documents for free through the web site
maintained  by the SEC at  http://www.sec.gov.  FIC,  ILCO and their  respective
directors,  executive  officers and certain  members of management and employees
may be  soliciting  proxies from FIC's and ILCO's  shareholders  in favor of the
merger and  matters  related  to the merger  that will be set forth in the Joint
Proxy Statement/Prospectus. A description of any interests that FIC's and ILCO's
directors  and  executive  officers  have in the merger will be available in the
Joint Proxy Statement/Prospectus.

This press release shall not  constitute an offer of any securities for sale nor
shall  there be any  sale of  securities  in any  state  in  which  such  offer,
solicitation or sale would be unlawful prior to  registration  or  qualification
under the securities laws of any such state.


                                      -2-

<PAGE>
[{"type": "8-K", "sequence": "1", "filename": "0001.txt", "description": "MERGER AGREEMENT BETWEEN FIC & ILCO", "secsgml_size_bytes": 221155}]
{"company-data": {"conformed-name": "INTERCONTINENTAL LIFE CORP", "cik": "0000050982", "assigned-sic": "6311", "irs-number": "221890938", "state-of-incorporation": "TX", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-07288", "film-number": "1512309"}, "business-address": {"street1": "THE AUSTIN CENTRE", "street2": "701 BRAZOS 12TH FL", "city": "AUSTIN", "state": "TX", "zip": "78701", "phone": "5124045050"}, "mail-address": {"street1": "701 BRAZOS STE 1400", "street2": "ATTN KELLYE S SEEKATZ", "city": "AUSTIN", "state": "TX", "zip": "78701"}, "former-company": [{"former-conformed-name": "INTERCONTINENTAL FINANCIAL CORP", "date-changed": "19781019"}, {"former-conformed-name": "INTERCONTINENTAL LIFE CO", "date-changed": "19600201"}]}
SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 8-K

                 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

       Date of report (date of earliest event reported): January 18, 2001

                       INTERCONTINENTAL LIFE CORPORATION
               (Exact name of Registrant as specified in charter)

           Texas                        0-7288              22-1890938
(State or other jurisdiction    (Commission file number)    (I.R.S. employer
        of incorporation)                                    identification no.)

                      6500 River Place Blvd., Building One
                              Austin, Texas 78730
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (512) 404-5000

                                      -1-
ITEM 5. Other Events

     On January 18, 2001, Financial Industries Corporation,  a Texas corporation
("FIC"),  and  InterContinental  Life Corporation,  a Texas corporation ("ILCO")
jointly  announced  that their  respective  Boards of Directors  have approved a
definitive  agreement  whereby FIC would  acquire the  remaining  common  shares
(approximately  52%) of ILCO  which FIC does not  currently  own.  The terms and
provisions of the  transaction  are set forth in an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of January 18, 2001, among FIC, ILCO and ILCO
Acquisition  Company,  a Texas  corporation and  wholly-owned  subsidiary of FIC
("Merger  Sub").  Subject to the conditions  set forth in the Merger  Agreement,
Merger  Sub will be  merged  with and into  ILCO,  with ILCO  continuing  as the
surviving  corporation  (the "Merger") and as a wholly-owned  subsidiary of FIC.
Pursuant to the Merger  Agreement,  1.1 shares of common stock,  par value $0.20
per share ("FIC Common  Stock"),  will be issued for each share of common stock,
par value  $0.22 per share,  of ILCO ("ILCO  Common  Stock") not held by FIC. In
addition,  each share of ILCO Common  Stock  issuable  pursuant  to  outstanding
options will be converted into options to receive 1.1 shares of FIC Common Stock
with the exercise price adjusted accordingly.

     The consummation of the Merger is subject to various  conditions  precedent
contained in the Merger Agreement,  including,  without limitation,  approval of
certain matters by the shareholders of each of FIC and ILCO.

ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.

        (c)     Exhibits.
                10.1*   -       Agreement and Plan of Merger, dated as of
                                January 18, 2001, among InterContinental Life
                                Corporation, Financial Industries
                                Corporation and ILCO Acquisition Company.
                99.1*   -       Press Release dated January 18, 2001.
                ______________
                * Filed herewith

                                      -2-
SIGNATURES
     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

INTERCONTINENTAL LIFE CORPORATION

By:       /s/ James M. Grace
Name:  James M. Grace
Title:    Vice President and Treasurer

Date:  January 22,  2001

                                      -3-
EXHIBIT 10.1

                          AGREEMENT AND PLAN OF MERGER

     THIS  AGREEMENT AND PLAN OF MERGER (this  "Agreement")  is made and entered
into as of January 18, 2001, by and among Financial  Industries  Corporation,  a
Texas corporation  ("FIC"),  ILCO Acquisition  Company,  a Texas corporation and
wholly-owned  subsidiary  of  FIC  ("Merger  Sub"),  and  InterContinental  Life
Corporation, a Texas corporation ("ILCO").

                                    RECITALS

     WHEREAS,  FIC currently  owns  approximately  48% of the common stock,  par
value $0.22 per share of ILCO ("ILCO Common Stock");

     WHEREAS,  it is proposed that FIC acquire all of the issued and outstanding
shares of ILCO  Common  Stock not owned by FIC by way of a merger of Merger  Sub
with and into ILCO, with ILCO surviving the merger as a wholly-owned  subsidiary
of FIC;

     WHEREAS,  FIC,  ILCO and Merger Sub believe it is in the best  interests of
their  respective  shareholders  to consummate the merger of Merger Sub with and
into ILCO in  accordance  with the terms and subject to the  conditions  of this
Agreement;

     WHEREAS, upon the terms and subject to the conditions set forth herein, the
Board  of  Directors  of  FIC,  upon  the  unanimous  recommendation  of a  duly
authorized   special  committee  thereof   (consisting   solely  of  independent
directors),  has approved the Agreement,  the merger of Merger Sub with and into
ILCO and the issuance of shares of common stock,  par value $0.20 per share (the
"FIC Common  Stock"),  of FIC in connection  therewith and has  recommended  the
approval of the issuance of shares of common stock under this Agreement by FIC's
shareholders;  WHEREAS,  upon the terms and subject to the  conditions set forth
herein,  the Board of Directors of ILCO, upon the unanimous  recommendation of a
duly authorized  special  committee  thereof  (consisting  solely of independent
directors),  has  approved  such  merger and has  recommended  approval  of this
Agreement by ILCO's shareholders;

     WHEREAS,  the Board of  Directors of Merger Sub has approved the merger and
has  recommended  approval of this  Agreement  by FIC, as its sole  shareholder;
WHEREAS,  it is the  intention of FIC, ILCO and Merger Sub that such merger will
qualify as a tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and

     WHEREAS,  FIC, ILCO and Merger Sub desire to make certain  representations,
warranties,  covenants and agreements in connection with such merger and also to
prescribe various conditions to such merger.

                                      -1-
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this  Agreement,  and for other good and  valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereto
hereby agree as follows:

                                   ARTICLE I
                                   THE MERGER

     1.1 The  Merger.  Upon the  terms and  subject  to the  conditions  of this
Agreement,  at the Effective Time (as defined in Section 1.3),  Merger Sub shall
merge with and into ILCO (the  "Merger") in accordance  with the Texas  Business
Corporation  Act  (the  "Texas  Code").  At the  Effective  Time,  the  separate
corporate  existence  of Merger Sub shall  cease and ILCO shall  continue as the
surviving corporation of the Merger (the "Surviving Corporation") under the laws
of the  State  of  Texas  and  with  all  the  rights,  privileges,  properties,
franchises,   immunities  and  powers,   and  subject  to  all  the  duties  and
liabilities,  of a corporation  organized under the Texas Code. The Merger shall
have the effects  set forth in the Texas Code  (including,  without  limitation,
Article 5.06 of the Texas Code).

     1.2  Closing.  Unless this  Agreement  shall have been  terminated  and the
transactions  herein  contemplated shall have been abandoned pursuant to Section
8.1, and subject to the  satisfaction  or waiver of the  conditions set forth in
Article VII, the closing of the Merger (the  "Closing") will take place at 10:00
a.m., Austin, Texas time, on the second business day following the date on which
the last to be  fulfilled or waived of the  conditions  set forth in Article VII
shall be fulfilled or waived in  accordance  with this  Agreement  (the "Closing
Date"),  at the offices of FIC,  6500 River Place  Blvd.,  Austin,  Texas 78730,
unless another date, time or place is agreed to by the parties hereto.

     1.3  Effective  Time.  The parties  hereto shall file with the Secretary of
State of the State of Texas (the "Texas Secretary of State") on the Closing Date
(or on such other date as the  parties  may agree)  articles  of merger or other
appropriate  documents,  executed in accordance with the relevant  provisions of
the Texas Code,  and make all other  filings or  recordings  required  under the
Texas Code in connection with the Merger. The Merger shall become effective upon
the filing of the articles of merger with the Texas  Secretary  of State,  or at
such later time specified in such articles of merger (the "Effective Time").

     1.4 Articles of Incorporation.

     (a) The Articles of Incorporation of Merger Sub in effect immediately prior
to  the  Merger  shall  be  the  Articles  of  Incorporation  of  the  Surviving
Corporation  until  thereafter  amended in  accordance  with their  terms and as
provided by the Texas Code.

     (b)  Concurrently  with the execution and delivery of this  Agreement,  the
Board of Directors of FIC has adopted a resolution  setting  forth and approving
an amendment to the  Articles of  Incorporation  of FIC in the form set forth as
Annex I hereto  (the  "Charter  Amendment"),  and  directing  that  the  Charter
Amendment  be  considered  by the  shareholders  of FIC at the FIC  Shareholders
Meeting (as defined in Section 5.2(b)), all in accordance with the provisions of
the Texas Code.  Prior to the Effective  Time of the Merger,  FIC shall file the
Charter Amendment with the Texas Secretary of State.

                                      -2-
1.5  Bylaws.  The Bylaws of Merger Sub in effect  immediately  prior to the
Merger shall be the bylaws of the Surviving Corporation until thereafter amended
in accordance with their terms and as provided by applicable law.

     1.6  Directors.  The  directors  of  Merger  Sub  immediately  prior to the
Effective Time shall, from and after the Effective Time, be the directors of the
Surviving  Corporation  until their  successors  shall have been duly elected or
appointed or qualified or until their earlier  death,  resignation or removal in
accordance  with the  Surviving  Corporation's  Articles  of  Incorporation  and
Bylaws.

     1.7 Officers. The officers of Merger Sub immediately prior to the Effective
Time shall,  from and after the Effective Time, be the officers of the Surviving
Corporation  until their successors shall have been duly elected or appointed or
qualified or until their  earlier  death,  resignation  or removal in accordance
with the Surviving Corporation's Articles of Incorporation and Bylaws.

     1.8 Effect on ILCO Capital Stock.

     (a) Outstanding  ILCO Common Stock.  Each share of ILCO Common Stock issued
(and not cancelled or retired)  immediately  prior to the Effective  Time (other
than shares of ILCO Common Stock held as treasury  shares by ILCO (but excluding
shares of ILCO Common Stock held by any of ILCO's  subsidiaries,  whether or not
treated as treasury shares of ILCO on a consolidated basis under GAAP) or shares
of ILCO Common Stock held by FIC) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to receive
1.1 validly issued, fully paid and nonassessable shares of FIC Common Stock. The
ratio of the shares of FIC Common  Stock to be issued in exchange for each whole
share of ILCO Common Stock is referred to as the "Exchange Ratio." The shares of
FIC Common Stock to be issued to holders of ILCO Common Stock in accordance with
this Section 1.8(a),  and any cash to be paid in accordance with Section 1.11(f)
in lieu of fractional shares of FIC Common Stock, are referred to as the "Merger
Consideration."

     (b) Treasury Shares;  FIC-Owned Shares. Each share of (i) ILCO Common Stock
and (ii) series A preferred  stock and series B preferred stock of ILCO, in each
case which is held as treasury  shares by ILCO at the Effective Time  ("Treasury
Shares")  (excluding  shares  of  ILCO  Common  Stock  held  by  any  of  ILCO's
subsidiaries,   whether  or  not  treated  as  treasury  shares  of  ILCO  on  a
consolidated  basis under  GAAP),  and each share of ILCO Common  Stock which is
held by FIC  (excluding  any shares of ILCO  Common  Stock owned by any of FIC's
subsidiaries)  at the Effective Time ("FIC-Owned  Shares"),  shall, by virtue of
the Merger and without any action on the part of ILCO or FIC, be  cancelled  and
retired and cease to exist, without any conversion thereof.

                                      -3-
(c) Impact of Stock  Splits,  etc. In the event of any change in FIC Common
Stock  and/or  ILCO Common  Stock  between  the date of this  Agreement  and the
Effective  Time of the Merger in accordance  with the terms of this Agreement by
reason  of any  stock  split,  stock  dividend,  subdivision,  reclassification,
recapitalization,  combination,  exchange of shares or the like,  the number and
class of shares of FIC Common Stock to be issued and  delivered in the Merger in
exchange  for each  outstanding  share of ILCO Common  Stock as provided in this
Agreement  shall  be  appropriately  adjusted  so as to  maintain  the  relative
proportionate  interests  of the  holders  of ILCO  Common  Stock and FIC Common
Stock.

     1.9 Effect on FIC Capital Stock.  Each share of FIC Common Stock issued and
outstanding  immediately  prior  to  the  Effective  Time  (including,   without
limitation,  shares of FIC Common Stock held by any  subsidiary  of FIC or ILCO)
shall remain outstanding and shall be unaffected by the Merger.

     1.10 Effect on Merger Sub Capital Stock. Each share of common stock,  $0.01
par  value,  of Merger  Sub  issued  and  outstanding  immediately  prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder  thereof,  be converted into one share of common stock,  $0.01 par
value,  of the  Surviving  Corporation  and  such  shares  shall,  collectively,
represent  all of the  issued and  outstanding  capital  stock of the  Surviving
Corporation.

     1.11 Exchange of Certificates.

     (a) Paying  Agent.  Immediately  following the  Effective  Time,  FIC shall
deposit with its transfer  agent and  registrar  (the "Paying  Agent"),  for the
benefit of the holders of ILCO Common  Stock  (other  than  Treasury  Shares and
FIC-Owned Shares),  certificates  representing the shares of FIC Common Stock to
be issued to such holders pursuant to Section 1.8 (such  certificates,  together
with any dividends or  distributions  with respect to the shares  represented by
such  certificates and any cash paid in lieu of fractional  shares of FIC Common
Stock pursuant to Section 1.11(f), being hereinafter referred to collectively as
the "Payment Fund").

     (b) Exchange  Procedures.  As soon as practicable after the Effective Time,
each holder of a certificate or  certificates  (which have not been cancelled or
retired) which prior thereto represented shares of ILCO Common Stock shall, upon
surrender to the Paying Agent of such certificate or certificates and acceptance
thereof by the Paying  Agent,  be entitled to a  certificate  representing  that
number of whole shares of FIC Common Stock which the aggregate  number of shares
of ILCO Common Stock previously  represented by such certificate or certificates
surrendered  shall have been  converted  into the right to receive  pursuant  to
Section 1.8 of this Agreement,  as the case may be, plus any cash to be received
in lieu of fractional shares, as provided in Section 1.11(f) below.

                                      -4-
The Paying  Agent  shall  accept such  certificates  upon  compliance  with such
reasonable  terms and  conditions  as the  Paying  Agent may impose to effect an
orderly  exchange thereof in accordance with its normal exchange  practices.  If
the Merger  Consideration  (or any portion  thereof) is to be  delivered  to any
person  other  than the  person in whose name the  certificate  or  certificates
representing the shares of ILCO Common Stock surrendered in exchange therefor is
registered,  it shall be a condition to such  exchange that the  certificate  or
certificates so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person  requesting such exchange shall pay to the
Paying Agent any transfer or other Taxes (as defined in Section  2.16)  required
by  reason of the  payment  of such  consideration  to a person  other  than the
registered holder of the certificate(s)  surrendered,  or shall establish to the
satisfaction  of the  Paying  Agent  that  such  Tax  has  been  paid  or is not
applicable.  After the Effective Time, there shall be no further transfer on the
records of ILCO or its transfer  agent of  certificates  representing  shares of
ILCO Common  Stock,  and if such  certificates  are  presented to the  Surviving
Corporation,   they  shall  be   cancelled   against   delivery  of  the  Merger
Consideration as hereinabove provided. Until surrendered as contemplated by this
Section  1.11(b),  each  certificate  representing  shares of ILCO Common  Stock
(other than certificates representing Treasury Shares and FIC-Owned Shares to be
cancelled in accordance  with the terms of this  Agreement),  shall be deemed at
any time after the  Effective  Time to represent  only the right to receive upon
such  surrender  the Merger  Consideration  without  any  interest  thereon,  as
contemplated by Section 1.8.

     (c) Letter of  Transmittal.  Promptly  after the Effective  Time (but in no
event more than five  business  days  thereafter),  FIC shall require the Paying
Agent to mail to each record holder of certificates  that  immediately  prior to
the Effective  Time  represented  shares of ILCO Common  Stock,  which have been
converted  pursuant to Section 1.8, a form of letter of transmittal (which shall
specify that delivery shall be effected,  and risk of loss and title shall pass,
only upon proper  delivery of  certificates  representing  shares of ILCO Common
Stock  to the  Paying  Agent,  and  which  shall be in such  form and have  such
provisions  as  FIC  reasonably  may  specify)  and   instructions  for  use  in
surrendering such  certificates and receiving the Merger  Consideration to which
such holder shall be entitled therefor pursuant to Section 1.8.

     (d) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions  with  respect  to FIC Common  Stock with a record  date after the
Effective Time shall be paid to the holder of any certificate  that  immediately
prior to the Effective Time  represented  shares of ILCO Common Stock which have
been converted pursuant to Section 1.8, until the surrender for exchange of such
certificate in accordance with this Article I. Following  surrender for exchange
of any such certificate,  there shall be paid to the holder of such certificate,
without interest, (i) at the time of such surrender,  the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with  respect to the number of whole  shares of FIC Common  Stock into which the
shares of ILCO Common Stock represented by such certificate immediately prior to
the  Effective  Time were  converted  pursuant to Section  1.8,  and (ii) at the
appropriate  payment date, the amount of dividends or other distributions with a
record date after the Effective  Time, but prior to such  surrender,  and with a
payment date  subsequent to such  surrender,  payable with respect to such whole
shares of FIC Common Stock.

     (e)  No  Further   Ownership  Rights  in  ILCO  Common  Stock.  The  Merger
Consideration paid upon the surrender for exchange of certificates  representing
shares of ILCO Common Stock in accordance with the terms of this Article I shall
be  deemed to have  been  issued  and paid in full  satisfaction  of all  rights
pertaining to the shares of ILCO Common Stock  theretofore  represented  by such
certificates,  subject,  however,  to  FIC's  obligation  (if  any)  to pay  any
dividends  or make  any  other  distributions  with a record  date  prior to the
Effective Time which may have been declared by ILCO on the shares of ILCO Common
Stock in  accordance  with the terms of this  Agreement  or prior to the date of
this Agreement and which remain unpaid at the Effective Time.

                                      -5-
(f) No Fractional Shares. No certificates or scrip representing  fractional
shares of FIC Common  Stock shall be issued upon the  surrender  for exchange of
certificates that immediately prior to the Effective Time represented  shares of
ILCO Common  Stock which have been  converted  pursuant to Section 1.8, and such
fractional  share  interests  will not entitle the owner  thereof to vote or any
rights of a  shareholder  of FIC.  In lieu of any such  fractional  shares,  the
Paying Agent shall, on behalf of all holders of fractional  shares of FIC Common
Stock,  aggregate all such fractional interests  (collectively,  the "Fractional
Shares") and such  Fractional  Shares shall be sold by the Paying Agent as agent
for the holders of such Fractional  Shares at the then  prevailing  price on the
Nasdaq Stock Market's Small Cap Market, all in the manner provided herein. Until
the net proceeds of such sale or sales have been  distributed  to the holders of
Fractional  Shares, the Paying Agent shall retain such proceeds in trust for the
benefit of such holders as part of the Payment Fund. All  commissions,  transfer
Taxes and other out-of-pocket  transaction costs,  including reasonable expenses
and  compensation of the Paying Agent shall be charged against the proceeds from
the sale of the Fractional  Shares.  The sale of the Fractional  Shares shall be
executed on the Nasdaq  Stock  Market's  Small Cap Market or through one or more
member firms of the Nasdaq  Stock Market and will be executed in round lots,  to
the extent practicable.  The Paying Agent will determine the portion, if any, of
the net proceeds of such sale or sales to which each holder of Fractional Shares
is entitled, by multiplying the amount of the aggregate net proceeds of the sale
of the Fractional Shares by a fraction,  the numerator of which is the amount of
Fractional  Shares to which such holder is entitled and the denominator of which
is the aggregate amount of Fractional  Shares to which all holders of Fractional
Shares are entitled;  provided,  however, that in lieu of the foregoing,  at the
sole  option of FIC,  FIC may  instead  satisfy  payment  with  respect  to such
Fractional  Shares  by  delivering  to  the  Paying  Agent  reasonably  promptly
following the Effective  Time cash (without  interest) in an amount equal to the
aggregate amount of all such Fractional Shares multiplied by the average closing
price per share of FIC  Common  Stock on the  Nasdaq  Stock  Market's  Small Cap
Market for the thirty (30) trading days immediately prior to the Effective Time.

     (g)  Termination  of Payment  Fund.  Any portion of the Payment  Fund which
remains undistributed to the holders of certificates representing shares of ILCO
Common  Stock for 240 days after the  Effective  Time shall be delivered to FIC,
upon  demand,  and any  holders  of  shares  of ILCO  Common  Stock who have not
theretofore  complied with this Article I shall  thereafter look only to FIC and
only as general  creditors  thereof for  payment of their  claims for any Merger
Consideration  and any  dividends  or  distributions  with respect to FIC Common
Stock to which they are entitled pursuant to this Article I.

     (h) No Liability.  Neither the Surviving  Corporation  nor the Paying Agent
shall be liable to any  person in  respect  of any cash,  shares,  dividends  or
distributions  payable  from the Payment  Fund  delivered  to a public  official
pursuant to any applicable  abandoned  property,  escheat or similar law. If any
certificates  representing  shares  of ILCO  Common  Stock  shall  not have been
surrendered  prior to five years after the Effective Time (or immediately  prior
to such  earlier  date on which any  Merger  Consideration  in  respect  of such
certificate   would  otherwise   escheat  to  or  become  the  property  of  any
Governmental  Entity  (as  defined  in Section  2.3)),  any such  cash,  shares,
dividends or distributions  payable in respect of such certificate shall, to the
extent   permitted  by  applicable   law,   become  the  property  of  Surviving
Corporation,  free and clear of all claims or interest of any person  previously
entitled thereto.

                                      -6-
(i)  Withholding  of Tax. FIC shall be entitled to deduct and withhold from
the Merger  Consideration  otherwise  payable  pursuant to this Agreement to any
former holder of ILCO Common Stock such amount as FIC (or any affiliate thereof)
or the Paying  Agent is  required  to deduct and  withhold  with  respect to the
making of such payment under the Code or state, local or foreign Tax law. To the
extent  that  amounts are so withheld by FIC,  such  withheld  amounts  shall be
treated  for all  purposes of this  Agreement  as having been paid to the former
holder of ILCO Common Stock in respect of which such  deduction and  withholding
was made by FIC.

                                   ARTICLE II
                     REPRESENTATIONS AND WARRANTIES OF ILCO

     ILCO hereby represents and warrants to FIC and Merger Sub as follows:

     2.1  Organization,  Standing  and  Corporate  Power.  Each of ILCO  and its
subsidiaries  is a  corporation  duly  organized,  validly  existing and in good
standing under the laws of the jurisdiction in which it is organized and has the
requisite  corporate  power and  authority to carry on its business as now being
conducted.  Each of ILCO and its  subsidiaries  is duly qualified to do business
and is in good standing in each jurisdiction in which the nature of its business
or  the  ownership  or  leasing  of  its  properties  makes  such  qualification
necessary,  except where the failure to be so qualified  could not reasonably be
expected to have a material adverse effect on the business,  properties, results
of  operations,   or  condition   (financial  or  otherwise)  of  ILCO  and  its
subsidiaries,  considered as a whole (an "ILCO Material Adverse  Effect").  ILCO
has delivered or made available to FIC true,  correct and complete copies of its
Articles of Incorporation  and Bylaws, as amended to the date of this Agreement.
For  purposes of this  Agreement,  a  "subsidiary"  of any person shall mean any
other  entity  at  least  a  majority  of  the  equity  interests  in  which  is
beneficially owned, directly or indirectly, by the specified person.

     2.2 Capital Structure. (a) The authorized capital stock of ILCO consists of
(i)  15,000,000  shares  of ILCO  Common  Stock  and (ii)  30,000,000  shares of
preferred  stock,  par value  $1.00 per  share,  of which  5,000,000  shares are
designated as series A preferred  stock and 15,000,000  shares are designated as
series B preferred  stock. At the close of business on January 15, 2001, none of
such shares of  preferred  stock are issued and  outstanding,  5,000,000 of such
shares of series A  preferred  stock and  15,000,000  of such shares of series B
preferred  stock are held as treasury  shares by ILCO or a  subsidiary  of ILCO,
8,127,071  shares of ILCO  Common  Stock were  issued and  outstanding,  388,000
shares of ILCO Common Stock were  reserved  for issuance  pursuant to options to
purchase  ILCO Common  Stock  ("ILCO  Stock  Options")  which have been  granted
pursuant to the ILCO 1999  Employee  Stock  Option Plan (the "ILCO Stock  Option
Plan"),  and 2,732,407  shares of ILCO Common Stock were held as treasury shares
by ILCO or a  subsidiary  of ILCO.  Except as set forth  above,  at the close of
business  on  January  15,  2001,  no shares of  capital  stock or other  equity
securities  of  ILCO  were   authorized,   issued,   reserved  for  issuance  or
outstanding.  All  outstanding  shares of ILCO Common  Stock are, and all shares
which may be issued pursuant to the ILCO Stock Option Plan, or upon the exercise
of outstanding ILCO Stock Options will be, when issued, duly authorized, validly
issued,  fully paid and nonassessable and not subject to any preemptive  rights.
No bonds,  debentures,  notes or other indebtedness of ILCO or any subsidiary of
ILCO  having  the  right to vote (or  convertible  into,  or  exchangeable  for,
securities having the right to vote) on any matters on which the shareholders of
ILCO or any  subsidiary  of ILCO may vote are  issued  or  outstanding.

                                      -7-
All the  outstanding  shares of capital stock or other equity  interests of each
subsidiary of ILCO have been validly issued and are fully paid and nonassessable
and are owned by ILCO, by one or more  wholly-owned  subsidiaries  of ILCO or by
ILCO and one or more  such  wholly-owned  subsidiaries,  free  and  clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "Liens"). Except as set forth above, neither
ILCO  nor  any  subsidiary  of  ILCO  has  any  outstanding   option,   warrant,
subscription  or other right,  agreement or commitment that either (i) obligates
ILCO or any subsidiary of ILCO to issue, sell or transfer, repurchase, redeem or
otherwise  acquire  or vote  any  shares  of the  capital  stock  of ILCO or any
subsidiary of ILCO or (ii)  restricts  the transfer of ILCO Common Stock.  Since
the close of business on January 15, 2001,  neither ILCO nor any  subsidiary  of
ILCO has issued any capital stock or securities or other rights convertible into
or exercisable  or  exchangeable  for shares of such capital  stock,  other than
shares of ILCO  Common  Stock  issued upon the  exercise  of ILCO Stock  Options
outstanding on January 15, 2001.

     (b) ILCO has good and marketable title to all of the issued and outstanding
shares of capital stock of each of its subsidiaries, in each case free and clear
of all Liens,  and ILCO has no  independent  assets,  operations or  liabilities
other  than  the   ownership   of  the  capital   stock  of  its   subsidiaries.
InterContinental  Growth Plans, Inc. has good and marketable title to all of the
outstanding capital stock of InterContinental  Life Agency, Inc., free and clear
of all Liens.

     2.3 Authority; Noncontravention. ILCO has the requisite corporate power and
authority  to enter into this  Agreement  and,  subject to the  approval  of its
shareholders as set forth in Section 5.2(a) with respect to the approval of this
Agreement (the "ILCO  Shareholders  Approval"),  to consummate the  transactions
contemplated by this Agreement.  The execution and delivery of this Agreement by
ILCO and the consummation by ILCO of the transactions  contemplated  hereby have
been duly  authorized  by all  necessary  corporate  action on the part of ILCO,
subject,  in the case of the Merger,  to the ILCO  Shareholders  Approval.  This
Agreement  has been duly  executed  and  delivered  by ILCO and,  assuming  this
Agreement  constitutes  the valid and binding  agreement  of FIC and Merger Sub,
constitutes a valid and binding  obligation of ILCO,  enforceable  against it in
accordance with its terms except that the enforcement  thereof may be limited by
(a) bankruptcy,  insolvency,  reorganization,  moratorium or similar laws now or
hereafter in effect relating to creditors' rights and remedies generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a  proceeding  at law or in  equity).  The  execution  and  delivery  of this
Agreement do not, and the consummation of the transactions  contemplated by this
Agreement and compliance with the provisions  hereof will not, (i) conflict with
any of the provisions of the Articles of  Incorporation or Bylaws of ILCO or the
comparable documents of any of its subsidiaries, (ii) except as set forth in the
ILCO Disclosure Letter and subject to the governmental filings and other matters
referred to in the following  sentence,  conflict with, result in a breach of or
default (with or without  notice or lapse of time, or both) under,  or give rise
to a right of  termination,  cancellation  or  acceleration of any obligation or
loss of a material  benefit  under,  or require the consent of any person under,
any indenture or other  agreement,  permit,  concession,  franchise,  license or
similar  instrument or undertaking to which ILCO or any of its subsidiaries is a
party or by which  ILCO or any of its  subsidiaries  or any of their  assets  is
bound  or  affected,  (iii)  result  in an  obligation  by ILCO,

                                      -8-
the  Surviving  Corporation,  FIC, or any of their  respective  subsidiaries  to
redeem,  repurchase  or retire (or offer to redeem,  repurchase  or retire)  any
indebtedness  of  ILCO or any of its  subsidiaries  outstanding  as of the  date
hereof or equity security of ILCO or any of its  subsidiaries  outstanding as of
the date hereof,  or (iv) subject to the governmental  filings and other matters
referred to in the following sentence, contravene any law, rule or regulation of
any  state or of the  United  States or any  political  subdivision  thereof  or
therein,  or any order, writ,  judgment,  injunction,  decree,  determination or
award currently in effect,  except,  in the cases of the foregoing  clauses (ii)
through  (iv),  for  conflicts,   breaches,   defaults  or  other   consequences
(collectively,  "breaches")  that,  individually or in the aggregate,  could not
reasonably be expected to have an ILCO Material  Adverse Effect or to materially
hinder  ILCO's  ability to  consummate  the  transactions  contemplated  by this
Agreement.  No consent,  approval or authorization  of, or declaration or filing
with,  or  notice  to,  any  governmental  agency  or  regulatory  authority  (a
"Governmental  Entity")  which has not been  received or made, is required by or
with respect to ILCO or any of its subsidiaries in connection with the execution
and  delivery  of this  Agreement  by ILCO  or the  consummation  by ILCO of the
transactions  contemplated  hereby,  except  for (i)  the  filing  of  premerger
notification and report forms under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976,  as amended  (the "HSR  Act"),  with  respect to the Merger and the
termination or earlier  expiration of the applicable  waiting period thereunder,
(ii) the filing of appropriate  documents  with,  and, to the extent  necessary,
approval  of,  the  respective  Commissioners  of  Insurance  of the  States  of
Washington  and Indiana and such notices and  consents as may be required  under
the  insurance  laws of any  jurisdiction  in  which  ILCO,  FIC or any of their
respective  subsidiaries  is domiciled or does  business,  (iii) the Joint Proxy
Statement/Prospectus  to be  filed  with  the  SEC  by  ILCO  relating  to  ILCO
Shareholders Approval, (iv) the filing of such reports under the Exchange Act as
may  be  required  in  connection  with  this  Agreement  and  the  transactions
contemplated  by this  Agreement,  (v) the filing of the articles of merger with
the  Texas  Secretary  of State  and  appropriate  documents  with the  relevant
authorities of other states in which ILCO is qualified to do business, (vi) such
filings  and  consents  as may be required  under any  environmental,  health or
safety law or regulation pertaining to any notification,  disclosure or required
approval triggered by the Merger or the other transactions  contemplated by this
Agreement,  and  (vii)  such  filings  as may be  required  in  connection  with
statutory  provisions and regulations  relating to real property  transfer gains
Taxes and real property transfer Taxes.

     2.4 ILCO SEC Documents;  Financial  Statements.  (a) Since January 1, 1997,
ILCO and its subsidiaries have filed with the Securities and Exchange Commission
("SEC") all forms, reports,  schedules,  statements and other documents required
to be  filed by it with  the SEC  pursuant  to the  Securities  Act of 1933,  as
amended (the  "Securities  Act"),  and the  Securities  Exchange Act of 1934, as
amended (the "Exchange  Act") (any such documents filed prior to the date hereof
being  collectively  referred  to as the  "ILCO  SEC  Documents").  The ILCO SEC
Documents,  including the financial statements or schedules included therein, at
the time filed,  or in the case of registration  statements on their  respective
effective  dates,  (i) complied in all  material  respects  with the  applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
(ii) did not at the time filed (or in the case of  registration  statements,  at
the time of  effectiveness),  contain any untrue statement of a material fact or
omit to state a material  fact  required to be stated  therein or  necessary  in
order to make the statements made therein,  in light of the circumstances  under
which they were made, not misleading.  The financial  statements included in the
ILCO SEC Documents (the "Financial Statements"), (i) have been prepared from and
are in accordance with, the books and records of ILCO and its subsidiaries,

                                      -9-
(ii)complied in all material  respects with applicable  accounting  requirements
and with the published  rules and  regulations of the SEC with respect  thereto,
(iii) have been  prepared  in  accordance  with  generally  accepted  accounting
principles  applied on a consistent  basis ("GAAP") during the periods  involved
and (iv) fairly present the consolidated financial position and the consolidated
results  of  operations  and cash flows of ILCO and its  subsidiaries  as of the
times and for the periods  referred to therein,  except that any such  Financial
Statements  that are  unaudited,  interim  financial  statements  are subject to
normal and recurring year-end adjustments.

     (b) ILCO has  previously  delivered  or made  available to FIC, in the form
filed with the SEC (including any amendments thereto), (i) its Annual Reports on
Form 10-K for each of the three fiscal years ended  December 31, 1999,  1998 and
1997,  (ii) all  definitive  proxy  statements  relating  to ILCO's  meetings of
shareholders  (whether  annual or special)  held since January 1, 1997 and (iii)
all other reports or  registration  statements  filed by ILCO with the SEC since
January 1, 1997.

     2.5 Absence of Certain  Changes or Events.  Except as disclosed in the ILCO
SEC  Documents or as disclosed in writing by ILCO to FIC in a disclosure  letter
(the "ILCO Disclosure  Letter"),  or as otherwise agreed to in writing after the
date hereof by FIC, or as expressly permitted by this Agreement,  since December
31, 1999,  ILCO and its  subsidiaries  have conducted their business only in the
ordinary course, and there has not been (a) any change which could reasonably be
expected to have an ILCO Material  Adverse Effect  (including as a result of the
consummation  of the  transactions  contemplated  by  this  Agreement),  (b) any
declaration,  setting  aside or payment of any  dividend  or other  distribution
(whether in cash,  stock or property) with respect to any of ILCO's  outstanding
capital  stock,  (c) any split,  combination or  reclassification  of any of its
outstanding  capital stock or any issuance or the  authorization of any issuance
of any other  securities in respect of, in lieu of or in substitution for shares
of its  outstanding  capital  stock,  (d) (i) any granting by ILCO or any of its
subsidiaries  to  any  director,   officer  or  other  employee  or  independent
contractor of ILCO or any of its subsidiaries of any increase in compensation or
acceleration of benefits,  except in the ordinary course of business  consistent
with prior practice or as was required under employment  agreements in effect on
December 31, 1999,  (ii) any granting by ILCO or any of its  subsidiaries to any
director,  officer or other employee or  independent  contractor of any increase
in, or acceleration of benefits in respect of,  severance or termination pay, or
pay in  connection  with any change of control of ILCO,  except in the  ordinary
course of business  consistent  with prior practice or as was required under any
employment,  severance or termination agreements in effect on December 31, 1999,
or (iii)  any  entry  by ILCO or any of its  subsidiaries  into any  employment,
severance,  change of control,  or  termination  or similar  agreement  with any
director,  executive  officer or other employee or independent  contractor other
than in the ordinary course of business  consistent with past practices,  or (e)
any change in accounting methods,  principles or practices by ILCO or any of its
subsidiaries  materially affecting its assets,  liabilities or business,  except
insofar as may have been required by a change in GAAP.

                                      -10-
2.6 No Extraordinary Payments or Change in Benefits. Except as set forth in
the ILCO Disclosure Letter, no current or former director,  officer, employee or
independent contractor of ILCO or any of its subsidiaries is entitled to receive
any  payment  under  any  agreement,  arrangement  or policy  (written  or oral)
relating  to  employment,  severance,  change  of  control,  termination,  stock
options, stock purchases,  compensation,  deferred compensation, fringe benefits
or other employee benefits currently in effect (collectively,  the "ILCO Benefit
Plans"),  nor will any  benefit  received  or to be  received  by any current or
former director,  officer,  employee or independent contractor of ILCO or any of
its  subsidiaries  under any ILCO Benefit Plan be accelerated or modified,  as a
result  of or  in  connection  with  the  execution  and  delivery  of,  or  the
consummation of the transactions contemplated by, this Agreement.

     2.7 Voting Requirements. The affirmative vote of at least two-thirds of the
outstanding  shares of ILCO Common  Stock  entitled to vote with  respect to the
approval of the Merger is the only vote of the holders of any class or series of
ILCO's capital stock  necessary to approve this  Agreement and the  transactions
contemplated by this Agreement.

     2.8 State Takeover  Statutes.  No state takeover statute or similar statute
or regulation applies or purports to apply to the Merger,  this Agreement or any
of the  transactions  contemplated  by this  Agreement  and no  provision of the
Articles of Incorporation,  Bylaws or other governing  instrument of ILCO or any
of its  subsidiaries  would,  directly  or  indirectly,  restrict  or impair the
ability of ILCO to consummate the transactions contemplated by this Agreement.

     2.9 Brokers.  Except as set forth in the ILCO Disclosure Letter, no broker,
finder or investment banker is entitled to any brokerage,  finder's or other fee
or commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of ILCO. A true,  correct and complete copy of
the engagement letter of P.W. Mattingly & Co. Inc. has been provided to FIC.

     2.10 Compliance with Applicable Laws. Each of ILCO and its subsidiaries has
in  effect  all  federal,  state,  local  and  foreign  governmental  approvals,
authorizations,  certificates,  filings, franchises,  licenses, notices, permits
and rights  (collectively,  "Permits") necessary for it to own, lease or operate
its properties  and assets and to carry on its business as now conducted,  other
than such  Permits  the  absence  of which  could  not,  individually  or in the
aggregate,  reasonably be expected to have an ILCO Material Adverse Effect,  and
there has  occurred no default  under any such Permit  other than such  defaults
which,  individually  or in the  aggregate,  could not reasonably be expected to
have  an  ILCO  Material  Adverse  Effect.  ILCO  and  its  subsidiaries  are in
compliance  with all applicable  statutes,  laws,  ordinances,  rules orders and
regulations  of any  Governmental  Entity,  including  without  limitation,  all
applicable  federal,  state and local  statutes and  regulations  regulating the
business  and  products  of  insurance,  except  for  such  noncompliance  which
individually  or in the  aggregate  could not  reasonably be expected to have an
ILCO Material Adverse Effect.

     2.11 Absence of Undisclosed  Liabilities.  Except for liabilities disclosed
in the  ILCO SEC  Documents,  liabilities  contemplated  by this  Agreement  and
liabilities set forth in the ILCO Disclosure  Letter,  ILCO and its subsidiaries
do not have any material  indebtedness,  obligations  or liabilities of any kind
(whether accrued, absolute,  contingent or otherwise) (a) required by GAAP to be
reflected  on  a  consolidated  balance  sheet  of  ILCO  and  its  consolidated
subsidiaries  or in the  notes,  exhibits  or  schedules  thereto  or (b)  which
reasonably could be expected to have an ILCO Material Adverse Effect.

                                      -11-
2.12  Litigation.  Except as disclosed in the ILCO SEC  Documents or as set
forth  in the  ILCO  Disclosure  Letter,  as of the  date  hereof,  there  is no
litigation,  administrative  action,  arbitration  or other  proceeding  pending
against ILCO or any of its subsidiaries or, to the knowledge of ILCO, threatened
that, individually or in the aggregate, could reasonably be expected to (a) have
an ILCO  Material  Adverse  Effect or (b) prevent,  or  significantly  delay the
consummation of the transactions  contemplated by this Agreement.  Except as set
forth  in the  ILCO  Disclosure  Letter,  as of the  date  hereof,  there  is no
judgment,  order,  injunction or decree of any Governmental  Entity  outstanding
against ILCO or any of its subsidiaries that,  individually or in the aggregate,
could  reasonably  be expected to have any effect  referred to in the  foregoing
clauses (a) and (b) of this Section 2.12.

     2.13 Transactions with Affiliates. Other than the transactions contemplated
by this Agreement,  or except to the extent  disclosed in the ILCO SEC Documents
or as set forth in the ILCO Disclosure Letter,  there have been no transactions,
agreements,  arrangements or understandings between ILCO or its subsidiaries, on
the one hand, and ILCO's  affiliates  (other than  subsidiaries  of ILCO) or any
other person,  on the other hand,  that would be required to be disclosed  under
Item 404 of Regulation S-K under the Securities Act.

     2.14 Labor Matters. Except as set forth in the ILCO SEC Documents or in the
ILCO Disclosure  Letter, (a) neither ILCO nor any of its subsidiaries is a party
to any labor or collective bargaining agreement, and no employees of ILCO or any
of its  subsidiaries  are  represented  by any  labor  organization,  (b) to the
knowledge  of  ILCO,  there  are no  material  representation  or  certification
proceedings,  or  petitions  seeking a  representation  proceeding,  pending  or
threatened to be brought or filed with the National Labor Relations Board or any
other labor  relations  tribunal or authority  and (c) to the knowledge of ILCO,
there  are  no  material  organizing  activities  involving  ILCO  or any of its
subsidiaries with respect to any group of employees of ILCO or its subsidiaries.

     2.15  Employee  Arrangements  and Benefit  Plans.  (a) ILCO has  previously
delivered or made  available to FIC (i) all ILCO Benefit  Plans,  including  all
employee  benefit  plans  within the  meaning of  Section  3(3) of the  Employee
Retirement  Income  Security  Act of 1974,  as amended  ("ERISA"),  and (ii) all
written    employment,    severance,    termination,    change-of-control,    or
indemnification  agreements (collectively,  the "Employment  Arrangements"),  in
each case under  which ILCO or any of its  subsidiaries  has any  obligation  or
liability (contingent or otherwise), except for any Employment Arrangement which
provides  for annual  compensation  (excluding  benefits)  of  $100,000 or less.
Except as set forth in the ILCO SEC Documents or in the ILCO  Disclosure  Letter
and  except  as could  not,  individually  or in the  aggregate,  reasonably  be
expected to have an ILCO Material Adverse Effect: (A) each ILCO Benefit Plan has
been  administered  and is in  compliance  with the  terms of such  plan and all
applicable laws, rules and regulations,  (B) no "reportable event" (as such term
is used in section 4043 of ERISA)  (other than those events for which the 30 day
notice has been waived pursuant to the  regulations),  "prohibited  transaction"
(as such term is used in section  406 of ERISA or  section  4975 of the Code) or
"accumulated funding deficiency" (as such term is used in section 412 or 4971 of
the Code) has heretofore  occurred with respect to any ILCO Benefit Plan and

                                      -12-
(C)each ILCO Benefit Plan intended to qualify  under Section  401(a) of the Code
has received a favorable  determination  from the United States Internal Revenue
Service ("IRS")  regarding its qualified  status,  or remedial  amendment period
under  Section  401(b) of the Code will not have  expired  prior to the  Closing
Date,  and no  notice  has  been  received  from  the IRS  with  respect  to the
revocation of such qualification.

     (b) As of the date hereof,  there is no  litigation  or  administrative  or
other proceeding  involving any ILCO Benefit Plan or Employment  Arrangement nor
has  ILCO or any of its  subsidiaries  received  written  notice  that  any such
proceeding  is  threatened,  in each case where an adverse  determination  could
reasonably be expected to have an ILCO Material  Adverse  Effect.  Except as set
forth in the ILCO Disclosure  Letter,  neither ILCO nor any of its  subsidiaries
has contributed to any "multiemployer plan" (within the meaning of section 3(37)
of ERISA) and neither  ILCO nor any of its  subsidiaries  has  incurred,  nor is
reasonably likely to incur, any withdrawal liability under Section 4201 of ERISA
which  remains  unsatisfied  in an amount which could  reasonably be expected to
have an ILCO Material  Adverse Effect.  The termination of, or withdrawal  from,
any ILCO Benefit Plan or  multiemployer  plan to which ILCO or its  subsidiaries
contributes,  on or prior to the Closing  Date,  will not subject ILCO or any of
its  subsidiaries to any liability under Title IV of ERISA that could reasonably
be expected to have an ILCO Material Adverse Effect.

     2.16 Tax Matters.  ILCO and each of its subsidiaries  have timely filed (or
been  included in a  consolidated,  combined or unitary Tax Return that has been
timely  filed) with the  appropriate  Governmental  Entities  all  material  Tax
Returns (as defined below) required to be filed through the date hereof and will
timely file any such  material  Tax Returns  required to be filed on or prior to
the Closing Date (except those under valid  extension)  and all such Tax Returns
are and will be true and correct in all material respects.

     (b)  all  material  Taxes  (as  defined  below)  of  ILCO  and  each of its
subsidiaries  have been or will be timely  paid or  adequately  reserved  for in
accordance with GAAP in the Financial Statements.

     (c) ILCO and its subsidiaries  have complied in all material  respects with
all applicable laws, rules and regulations relating to the withholding of Taxes.

     (d) Except as set forth in the ILCO Disclosure Letter:

          (i) no  material  deficiencies  for  any  Taxes  have  been  proposed,
     asserted or assessed against ILCO or any of its subsidiaries  that have not
     been fully paid or  adequately  provided for in the  appropriate  financial
     statements of ILCO and its subsidiaries, and no material issues relating to
     Taxes have been  raised in writing by any  Governmental  Entity  during any
     presently pending audit or examination;

          (ii) ILCO and its  subsidiaries  are not now  subject  to audit by any
     Governmental  Entity and no waivers of statutes of limitation  with respect
     to the Tax Returns  have been given by or requested in writing from ILCO or
     any of its subsidiaries;

                                      -13-
(iii) there are no material  Liens for Taxes (other than for Taxes not
     yet due and payable) on any assets of ILCO or any of its subsidiaries;

          (iv) neither ILCO nor any of its  subsidiaries  is a party to or bound
     by (nor will any of them become a party to or bound by) any Tax  indemnity,
     Tax sharing, Tax allocation, or similar agreement,  arrangement or practice
     with respect to Taxes, except among themselves;

          (v) neither ILCO nor any of its subsidiaries has ever been a member of
     an affiliated  group of corporations  within the meaning of Section 1504 of
     the Code,  other  than the  affiliated  group of which  ILCO is the  common
     parent;

          (vi) neither ILCO nor any of its  subsidiaries has agreed to make, nor
     is any required to make, any adjustment under Section 481(a) of the Code or
     any similar provision of state,  local or foreign law by reason of a change
     in accounting method or otherwise;

          (vii)  neither  ILCO nor any of its  subsidiaries  has  received a Tax
     ruling from any Governmental  Entity,  or entered into a closing  agreement
     with any Governmental  Entity, that would have a continuing material effect
     after the Closing Date; and

          (viii)  neither  ILCO  nor any of its  subsidiaries  is a party to any
     contract,  agreement or other arrangement which would result in the payment
     of amounts that could be nondeductible by reason of Sections 280G or 162(m)
     of the Code.

     (e) No portion  of either  ILCO or any of its  subsidiaries  is or has ever
been, a "taxable  mortgage pool" as defined in Section  7701(i) of the Code.

     (f) For the taxable  period  ending on the  Closing  Date and for all prior
taxable   periods  for  which  the  statute  of  limitations  has  not  expired,
Investors-NA  and  Investors-IN  (i) qualifies (and  qualified) as an "insurance
company" within the meaning of Treasury  Regulation  Section  1.801-3(a)  (under
former  Section  801 of the Code) and as a life  insurance  company"  within the
meaning  of  Section  816(a) of the Code,  and (ii) are (and  were)  subject  to
taxation under Subchapter L of the Code.

     (g) The insurance  reserves and unearned  premiums with respect to ILCO and
each of its  subsidiaries set forth in all their federal Tax Returns as to which
the statute of  limitations  has not expired  were  determined  in all  material
respects in accordance with Section 807 of the Code.

     (h) The unpaid losses with respect to ILCO and each of its subsidiaries set
forth in all of their federal Tax Returns as to which the statute of limitations
has not expired were based upon  reasonable  estimations  and were discounted in
all material respects in accordance with Section 846 of the Code.

                                      -14-
(i) Each  life  insurance  policy  and  annuity  contract  issued,  sold or
administered  by  ILCO  or any  of its  subsidiaries,  at  all  relevant  times,
satisfied, and does satisfy, the requirements of, and/or has qualified, and does
qualify, under, Sections 72, 264, 401(a),403(a), 403(b), 817, 7702, 7702A of the
Code and the  Treasury  Regulations  thereunder,  as  applicable,  except to the
extent that failures to satisfy or qualify in the aggregate,  were such failures
tripled, would not result in any ILCO Material Adverse Effect.

     (j)  ILCO has not  constituted  either a  "distributing  corporation"  or a
"controlled  corporation"  (within  the meaning of Section  355(a)(1)(A)  of the
Code) in a distribution of stock qualifying for tax-free treatment under Section
355 of the Code (i) in the two years prior to the date of this Agreement or (ii)
in a distribution  which could otherwise  constitute part of a "plan" or "series
of related  transactions"  (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.

     (k) Neither  ILCO nor any of its  subsidiaries  knows of any fact,  plan or
circumstance  that is reasonably likely to prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code.

     As used in this  Agreement,  "Tax  Return"  shall mean any return,  report,
claim for refund,  estimate,  information  return or statement or other  similar
document  relating to or required to be filed with any Governmental  Entity with
respect to Taxes,  including any schedule or attachment  thereto,  and including
any amendment  thereof.  As used in this Agreement,  "Taxes" shall mean taxes of
any kind,  including  but not  limited to those  measured  by or  referred to as
income,  franchise,  gross receipts,  sales, use, ad valorem,  profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
value added,  property or windfall  profits  taxes,  customs,  duties or similar
fees, assessments or charges of any kind whatsoever,  together with any interest
and  any  penalties,  additions  to tax or  additional  amounts  imposed  by any
Governmental  Entity,  domestic or foreign and shall  include any  transferee or
successor  liability in respect of Taxes  (whether by contract or otherwise) and
any several liability in respect of any Tax as a result of being a member of any
affiliated, consolidated, combined, unitary or similar group.

     2.17  Intellectual  Property.  Except as set  forth in the ILCO  Disclosure
Letter and except to the extent of any  inaccuracy  of any of the  following (or
the circumstances giving rise to such inaccuracy) which,  individually or in the
aggregate,  could not  reasonably be expected to have an ILCO  Material  Adverse
Effect:  (a) ILCO and each of its  subsidiaries  owns, or is licensed to use (in
each case, free and clear of any Liens),  all Intellectual  Property (as defined
below)  used in or  necessary  for the  conduct  of its  business  as  currently
conducted; (b) the use of any Intellectual Property by ILCO and its subsidiaries
does not  infringe  on or  otherwise  violate the rights of any person and is in
accordance with any applicable  license pursuant to which ILCO or any subsidiary
acquired the right to use any  Intellectual  Property;  (c) to the  knowledge of
ILCO, no person is challenging,  infringing on or otherwise  violating any right
of ILCO or any of its  subsidiaries  with respect to any  Intellectual  Property
owned by and/or licensed to ILCO or its  subsidiaries;  and

                                      -15-
(d) neither ILCO nor any of its  subsidiaries has received any written notice of
any pending claim with respect to any Intellectual Property used by ILCO and its
subsidiaries and to its knowledge no Intellectual Property owned and/or licensed
by ILCO or its  subsidiaries  is being used or  enforced  in a manner that would
result in the abandonment, cancellation or unenforceability of such Intellectual
Property.

     For  purposes  of  this  Agreement,   "Intellectual  Property"  shall  mean
trademarks,  service marks,  brand names and other  indications  of origin,  the
goodwill associated with the foregoing and registrations in any jurisdiction of,
and applications in any jurisdiction to register,  the foregoing,  including any
extension,  modification  or renewal of any such  registration  or  application;
inventions,   discoveries  and  ideas,   whether   patentable  or  not,  in  any
jurisdiction;  patents, applications for patents (including, without limitation,
divisions,  continuations,  continuations in part and renewal applications), and
any renewals,  extensions or reissues thereof,  in any  jurisdiction;  nonpublic
information,  trade  secrets  and  confidential  information  and  rights in any
jurisdiction to limit the use or disclosure thereof by any person;  writings and
other works, whether copyrightable or not, in any jurisdiction; registrations or
applications  for  registration  of  copyrights  in any  jurisdiction,  and  any
renewals or extensions thereof; any similar intellectual property or proprietary
rights;  and any claims or causes of action  arising  out of or  relating to any
infringement or misappropriation of any of the foregoing.

     2.18 Environmental  Matters.  Except as disclosed in the ILCO SEC Documents
or as set forth in the ILCO Disclosure Letter and except as could not reasonably
be expected to have an ILCO Material Adverse Effect:  (a) the operations of ILCO
and its subsidiaries have been and are in compliance with all Environmental Laws
(as defined  below) and with all Permits  required by  Environmental  Laws,  (b)
there are no pending or, to the knowledge of ILCO, threatened,  actions,  suits,
claims,  investigations or other proceedings (collectively,  "Actions") under or
pursuant to Environmental Laws against ILCO or its subsidiaries or involving any
real property currently or, to the knowledge of ILCO,  formerly owned,  operated
or leased by ILCO or its  subsidiaries,  (c) ILCO and its  subsidiaries  are not
subject  to any  Environmental  Liabilities  (as  defined  below),  and,  to the
knowledge of ILCO, no facts,  circumstances  or conditions  relating to, arising
from,  associated with or attributable to any real property currently or, to the
knowledge  of  ILCO,  formerly  owned,   operated  or  leased  by  ILCO  or  its
subsidiaries or operations  thereon that could  reasonably be expected to result
in Environmental Liabilities,  (d) all real property owned and, to the knowledge
of ILCO,  all real property  operated or leased by ILCO or its  subsidiaries  is
free of contamination  from Hazardous  Material (as defined below) and (e) there
is not now, nor, to the knowledge of ILCO, has there been in the past, on, in or
under  any  real  property  owned,  leased  or  operated  by  ILCO or any of its
predecessors  (i) any  underground  storage tanks,  above- ground storage tanks,
dikes  or  impoundments  containing  Hazardous  Materials,  (ii)  any  asbestos-
containing  materials,   (iii)  any  polychlorinated   biphenyls,  or  (iv)  any
radioactive substances.

     As used in this Agreement,  "Environmental Laws" means any and all federal,
state,  local  or  municipal  laws,  rules,   orders,   regulations,   statutes,
ordinances, codes, decisions,  injunctions, orders, decrees, requirements of any
Governmental  Entity,  any and all common law  requirements,  rules and bases of
liability regulating,  relating to or imposing liability or standards of conduct
concerning  pollution,  Hazardous Materials or protection of human health or the
environment,  as  currently in effect and  includes,  but is not limited to, the
Comprehensive Environmental Response,  Compensation and Liability Act, 42 U.S.C.
9601 et seq., the Hazardous Materials Transportation Act 49 U.S.C. 1801 et seq.,
the Resource  Conservation  and Recovery Act, 42 U.S.C.  6901 et seq., the Clean
Water Act, 33 U.S.C.  1251 et seq.,  the Clean Air Act, 33 U.S.C.  2601 et seq.,

                                      -16-
the  Toxic  Substances  Control  Act,  15  U.S.C.  2601  et  seq.,  the  Federal
Insecticide,  Fungicide and Rodenticide Act, 7 U.S.C.,  136 et seq., and the Oil
Pollution Act of 1990, 33 U.S.C. 2701 et seq., as such laws have been amended or
supplemented,   and  the  regulations  promulgated  pursuant  thereto,  and  all
analogous  state or local statutes.  As used in this  Agreement,  "Environmental
Liabilities"  with  respect to any person  means any and all  liabilities  of or
relating to such person or any of its  subsidiaries  (including any entity which
is,  in  whole  or in  part,  a  predecessor  of  such  person  or any  of  such
subsidiaries),  whether  vested or  unvested,  contingent  or  fixed,  actual or
potential,  known or unknown, which (i) arise under or relate to matters covered
by  Environmental  Laws and (ii)  relate  to  actions  occurring  or  conditions
existing on or prior to the Closing Date. As used in this Agreement,  "Hazardous
Materials"  means  any  hazardous  or toxic  substances,  materials  or  wastes,
defined,  listed,  classified or regulated as such in or under any Environmental
Laws which  includes,  but is not limited  to,  petroleum,  petroleum  products,
friable asbestos, urea formaldehyde and polychlorinated biphenyls.

     2.19  Material  Contracts.  (a) Except as set forth in the ILCO  Disclosure
Letter,  all contracts  and  agreements  of ILCO and its  subsidiaries  that are
required to be  described  in the ILCO SEC  Documents or to be filed as exhibits
thereto are  described in the ILCO SEC  Documents  or filed as exhibits  thereto
("Material Contracts"), respectively, and are in full force and effect and, upon
consummation of the  transactions  contemplated  hereby,  shall continue in full
force and effect without penalty, acceleration, termination, repurchase right or
other adverse  consequence.  ILCO has previously  delivered or made available to
FIC, true, correct and complete copies of all such Material  Contracts.  Neither
ILCO nor any of its subsidiaries,  nor to the knowledge of ILCO, any other party
is in breach of or in default under any such Material  Contract and no event has
occurred  that  with the lapse of time or the  giving  of  notice or both  would
constitute a default  thereunder by ILCO or, to the knowledge of ILCO, any other
party thereto,  in any such case in which such default or event could reasonably
be  expected  to have an ILCO  Material  Adverse  Effect.  Neither  ILCO nor any
subsidiary of ILCO has received any written  notice (or to the knowledge of ILCO
any other notice) of default or termination under any Material Contract,  and to
the  knowledge of ILCO,  there  exists no basis for any  assertion of a right of
default or termination under such Material Contracts.

     2.20 Tangible Property.  All of the assets of ILCO and its subsidiaries are
in good operating  condition,  reasonable wear and tear excepted,  and usable in
the  ordinary  course  of  business,  except  where  the  failure  to be in such
condition or so usable could not,  individually or in the aggregate,  reasonably
be expected to have an ILCO Material Adverse Effect.

     2.21 Fairness  Opinion.  The special committee of ILCO's Board of Directors
(the "ILCO Special  Committee") has received an opinion of P.W.  Mattingly & Co.
Inc.,  financial  advisor to the ILCO  Special  Committee,  (the "ILCO  Fairness
Opinion"),  to the effect  that the Merger is fair,  from a  financial  point of
view, to the shareholders of ILCO.

                                      -17-
2.22 Insurance Business.

     (a)  Except as  otherwise  could  not,  individually  or in the  aggregate,
reasonably be expected to have an ILCO Material  Adverse  Effect,  all policies,
binders, slips, certificates,  guaranteed insurance contracts, annuity contracts
and  participation  agreements  and  other  agreements  of  insurance,   whether
individual  or  group,   in  effect  as  of  the  date  hereof   (including  all
applications,  supplements,  endorsements,  riders and  ancillary  agreements in
connection therewith) that are issued by Investors Life Company of North America
("Investors-NA") and Investors Life Insurance Company of Indiana ("Investors-IN"
and,  collectively  with Investors- NA, the "ILCO  Insurance  Companies") or any
predecessor  of  the  ILCO  Insurance  Companies,  and  any  and  all  marketing
materials,  are, to the extent required under  applicable law, on forms approved
by applicable insurance regulatory  authorities or which have been filed and not
objected to by such  authorities  within the period provided for objection,  and
such forms and  marketing  materials  comply in all material  respects  with the
insurance statutes, regulations and rules applicable thereto.

     (b)  ILCO  has  delivered  or made  available  to FIC a true,  correct  and
complete copy of all actuarial  reports  prepared by ILCO's  actuaries,  and any
actuarial  reports prepared by other actuaries,  independent or otherwise,  with
respect  to  any  ILCO  Insurance   Company  since  January  1,  1998,  and  all
attachments, addenda, supplements and modifications thereto (the "ILCO Actuarial
Analyses"). To the knowledge of ILCO, the information and data furnished by ILCO
or any ILCO Insurance  Company to its  independent  actuaries in connection with
the  preparation  of the ILCO  Actuarial  Analyses were accurate in all material
respects.  Furthermore,  each ILCO Actuarial Analysis was based upon an accurate
inventory of policies in force for the ILCO Insurance Companies, at the relevant
time  of  preparation,   was  prepared  using  appropriate  modeling  procedures
accurately applied and in conformity with generally accepted actuarial standards
consistently  applied,  and the  projections  contained  therein  were  properly
prepared in accordance with the assumptions stated therein.

     (c) To the  knowledge of ILCO,  except as set forth in the ILCO  Disclosure
Letter or as reserved for or disclosed  in the ILCO SEC  Documents,  or as could
not,  individually  or in the aggregate,  reasonably be expected to have an ILCO
Material Adverse Effect, all amounts recoverable under reinsurance,  coinsurance
or other  similar  contracts  to which  any ILCO  Insurance  Company  is a party
(including,  but not limited to,  amounts  based on paid and unpaid  losses) are
fully collectible.

     (d) ILCO has delivered or made available to FIC true,  correct and complete
copies of all  analyses,  reports  and other data  prepared  by ILCO or any ILCO
Insurance  Company or  submitted  by ILCO or any ILCO  Insurance  Company to any
insurance regulatory authority or received by ILCO or any ILCO Insurance Company
relating to risk-based  capital  calculations  or IRIS ratios of the years ended
December 31, 1999 and 1998.

     (e)  ILCO  has  delivered  or made  available  to FIC a true,  correct  and
complete  list on a per  risk and  aggregate  basis  of the  maximum  underlying
retentions (net of all reinsurance  maintained) on all insurance and reinsurance
policies  written or entered into by any ILCO  Insurance  Company since December
31, 1999.

     (f) Except as could not,  individually  or in the aggregate,  reasonably be
expected to have an ILCO Material Adverse Effect, all annuity contracts and life
insurance  policies issued by an ILCO Insurance Company meet all definitional or
other  requirements  for  qualification  under the Code section  applicable  (or
intended to be applicable) to such annuity contracts or life insurance policies.

                                      -18-
(g) Except as set forth the ILCO Disclosure  Letter,  there are no material
"hold harmless"  indemnification  agreements respecting the Tax qualification or
treatment of any product or plan sold,  issued,  entered into or administered by
the ILCO  Insurance  Companies,  and there have been no claims  asserted  by any
person under such "hold harmless" indemnification agreements.

     2.23 Liabilities and Reserves.

     (a) Except as set forth in the ILCO Disclosure Letter, the reserves carried
on the  books  of each  ILCO  Insurance  Company  for  future  insurance  policy
benefits,  losses,  claims and similar purposes were, as of the respective dates
of such ILCO financial  statements  required to be submitted to the  appropriate
regulatory  authorities  of  the  jurisdictions  in  which  the  ILCO  Insurance
Companies  are domiciled on forms  prescribed or permitted by such  authority in
compliance  in  all  material   respects  with  the  requirements  for  reserves
established  by the insurance  departments of the state of domicile of such ILCO
Insurance  Company,  were determined in all material respects in accordance with
generally accepted actuarial  standards  consistently  applied,  and were fairly
stated in all material respects in accordance with sound actuarial and statutory
accounting principles. ILCO has delivered or made available to FIC true, correct
and  complete  copies  of the  Annual  Statements  delivered  to  the  insurance
department of the domiciliary state of each ILCO Insurance Company for the years
ended  December 31, 1999 and 1998.  ILCO has delivered or made  available to FIC
copies of all work papers used as the basis for  establishing  the  reserves for
the ILCO  Insurance  Companies  at December  31,  1999 and  December  31,  1998,
respectively,  as well as all  reports  with  respect  to the  adequacy  of such
reserves.

     (b) Except for  regular  periodic  assessments  in the  ordinary  course of
business or as reserved for or disclosed in the ILCO SEC Documents,  no claim or
assessment is pending nor, to the knowledge of ILCO, threatened against any ILCO
Insurance  Company by any state  insurance  guaranty  associations in connection
with such  association's fund relating to insolvent insurers which if determined
adversely,  could,  individually or in the aggregate,  reasonably be expected to
have an ILCO Material Adverse Effect.

     2.24 ILCO Broker/Dealers.

     (a) ILCO  operates its  broker/dealer  operations  exclusively  through ILG
Securities  Corporation (the "ILCO  Broker/Dealer").  The ILCO  Broker/Dealer is
registered as a broker-dealer with the SEC and has been since January 1, 1997 in
full compliance with all applicable laws, except for any failures to register or
comply which could not, individually or in the aggregate, reasonably be expected
to have an ILCO Material  Adverse  Effect.  The ILCO  Broker/Dealer  is a member
organization in good standing of the National Association of Securities Dealers,
Inc.  except such failures to be in good standing which could not,  individually
or in the  aggregate,  reasonably be expected to have an ILCO  Material  Adverse
Effect.

                                      -19-
(b) Except as could not,  individually  or in the aggregate,  reasonably be
expected to have an ILCO Material Adverse Effect, the ILCO Broker/Dealer is not,
nor is any "associated person" of it, subject to a "statutory  disqualification"
(as such terms are defined in the Exchange Act) or subject to a disqualification
that would be a basis for censure,  limitations on the activities,  functions or
operations  of, or  suspension or  revocation  of the  registration  of the ILCO
Broker Dealer as  broker-dealer  under Section 15, Section 15B or Section 15C of
the  Exchange  Act  and,  to  ILCO's  knowledge,  there  are no  proceedings  or
investigations   pending   by  any   Governmental   Entity  or   self-regulatory
organization   that  is  reasonably  likely  to  result  in  any  such  censure,
limitations, suspension or revocation.

     (c) Except as could not,  individually  or in the aggregate,  reasonably be
expected to have an ILCO Material Adverse Effect, since its inception,  the ILCO
Broker/Dealer  has had net capital (as such term is defined in Rule 15c3-1 under
the Exchange  Act) that  satisfies the minimum net capital  requirements  of the
Exchange Act.

                                  ARTICLE III
                     REPRESENTATIONS AND WARRANTIES OF FIC

     FIC represents and warrants to ILCO as follows:

     3.1  Organization,  Standing  and  Corporate  Power.  Each  of FIC  and its
subsidiaries  is a  corporation  duly  organized,  validly  existing and in good
standing under the laws of the  jurisdiction in which it is incorporated and has
the  requisite  corporate  power and  authority  to carry on its business as now
being  conducted.  Each of FIC  and its  subsidiaries  is duly  qualified  to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such  qualification
necessary,  except where the failure to be so qualified  could not reasonably be
expected to have a material adverse effect on the business,  properties, results
of   operations,   or  condition   (financial  or  otherwise)  of  FIC  and  its
subsidiaries,  considered as a whole (an "FIC Material Adverse Effect"). FIC has
previously delivered or made available to ILCO true, correct and complete copies
of its  Articles of  Incorporation  and  Bylaws,  as amended to the date of this
Agreement.

     3.2 Capital  Structure.  The  authorized  capital  stock of FIC consists of
10,000,000  shares of FIC Common Stock.  At the close of business on January 15,
2001, 5,054,661 shares of FIC Common Stock were issued and outstanding,  500,411
shares of FIC Common Stock were  reserved for issuance  pursuant to  outstanding
options or  warrants  to purchase  FIC Common  Stock which have been  granted to
Investors-NA ("FIC Stock Options"),  and 790,639 shares of FIC Common Stock were
held as  treasury  shares  by FIC or a  subsidiary  of FIC.  Except as set forth
above,  at the close of business on January 15, 2001, no shares of capital stock
or other equity securities of FIC were authorized, issued, reserved for issuance
or  outstanding.  All  outstanding  shares of capital  stock of FIC are, and all
shares which may be issued  pursuant to FIC's stock option plans,  as amended to
the date hereof,  or upon the exercise of outstanding FIC Stock Options will be,
when issued, duly authorized,  validly issued,  fully paid and nonassessable and
not  subject to any  preemptive  rights.  No bonds,  debentures,  notes or other
indebtedness  of FIC or any  subsidiary  of FIC  having  the  right  to vote (or
convertible into, or exchangeable  for,  securities having the right to vote) on
any matters on which the  shareholders  of FIC or any subsidiary of FIC may vote
are issued or outstanding.  All the outstanding  shares of capital stock of each
subsidiary of FIC have been validly issued and are fully paid and  nonassessable
and are owned by FIC, by one or more wholly-owned  subsidiaries of FIC or by FIC
and one or more such  wholly-owned  subsidiaries,  free and clear of all  Liens,

                                      -20-
except for Liens that, individually or in the aggregate, could not reasonably be
expected to have an FIC  Material  Adverse  Effect.  Except as set forth  above,
neither  FIC nor any  subsidiary  of FIC has any  outstanding  option,  warrant,
subscription  or other right,  agreement or commitment that either (i) obligates
FIC or any subsidiary of FIC to issue, sell or transfer,  repurchase,  redeem or
otherwise  acquire or vote any shares of the capital  stock of FIC or any of its
subsidiaries or (ii) restricts the transfer of FIC Common Stock. Since the close
of business  on January 15,  2001,  neither  FIC nor any  subsidiary  of FIC has
issued any capital  stock or  securities  or other  rights  convertible  into or
exercisable or exchangeable for shares of such capital stock,  other than shares
of FIC Common Stock issued upon the exercise of FIC Stock Options outstanding on
January 15, 2001.

     (b) FIC has good and marketable  title to all of the issued and outstanding
shares of capital stock of each of its subsidiaries, in each case free and clear
of all Liens, and FIC has no independent assets, operations or liabilities other
than the ownership of the capital stock of its subsidiaries.

     3.3 Authority;  Noncontravention. FIC has the requisite corporate power and
authority  to enter into this  Agreement  and,  subject to the  approval  of its
shareholders  as set forth in Section 5.2(b) with respect to the approval of (i)
the issuance of shares of FIC Common Stock  contemplated  by this  Agreement and
(ii) the Charter Amendment (the "FIC Shareholders Approval"),  to consummate the
transactions  contemplated by this Agreement. The execution and delivery of this
Agreement by FIC and the  consummation by FIC of the  transactions  contemplated
hereby have been duly authorized by all necessary  corporate  action on the part
of FIC,  subject,  in the case of the  issuance of shares of FIC Common Stock in
the Merger and the Charter  Amendment,  to the FIC Shareholders  Approval.  This
Agreement  has been  duly  executed  and  delivered  by FIC and,  assuming  this
Agreement  constitutes  the valid and binding  agreement of ILCO,  constitutes a
valid and binding obligation of FIC,  enforceable  against it in accordance with
its terms except that the enforcement  thereof may be limited by (a) bankruptcy,
insolvency,  reorganization,  moratorium  or similar  laws now or  hereafter  in
effect  relating to  creditors'  rights and remedies  generally  and (b) general
principles of equity  (regardless of whether  enforceability  is considered in a
proceeding at law or in equity). The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated by this Agreement and
compliance  with the  provisions  hereof will not, (i) conflict  with any of the
provisions of the Articles of  Incorporation  or Bylaws of FIC or the comparable
documents  of any  subsidiary  of  FIC,  (ii)  except  as set  forth  in the FIC
Disclosure  Letter (as  defined  below in Section 3.5 hereof) and subject to the
governmental  filings and other matters  referred to in the following  sentence,
conflict with, result in a breach of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration  of any obligation or loss of a material  benefit under, or require
the consent of any person  under,  any  indenture  or other  agreement,  permit,
concession, franchise, license or similar instrument or undertaking to which FIC
or any of its subsidiaries is a party or by which FIC or any of its subsidiaries
or any of their assets is bound or affected,  (iii) result in an  obligation  by
FIC or any of its  subsidiaries  to  redeem,  repurchase  or retire (or offer to
redeem, repurchase or retire) any indebtedness of FIC or any of its subsidiaries
outstanding  as of the  date  hereof  or  equity  security  of FIC or any of its
subsidiaries  outstanding  as of  the  date  hereof,  or  (iv)  subject  to  the
governmental  filings and other matters  referred to in the following  sentence,
contravene  any law,  rule or regulation of any state or of the United States or
any political  subdivision  thereof or therein,  or any order,  writ,  judgment,
injunction,  decree,  determination or award currently in effect, except, in the
cases  of  the  foregoing   clauses  (ii)  through  (iv),   for  breaches  that,

                                      -21-
individually or in the aggregate,  could not reasonably be expected to have
an FIC  Material  Adverse  Effect  or to  materially  hinder  FIC's  ability  to
consummate the transactions contemplated by this Agreement. No consent, approval
or  authorization  of,  or  declaration  or  filing  with,  or  notice  to,  any
Governmental  Entity which has not been received or made, is required by or with
respect to FIC or any of its  subsidiaries  in connection with the execution and
delivery of this Agreement by FIC or the consummation by FIC of the transactions
contemplated  hereby,  except for (i) the filing of premerger  notification  and
report forms under the HSR Act with respect to the Merger and the termination or
earlier expiration of the applicable waiting period thereunder,  (ii) the filing
of appropriate  documents with, and, to the extent  necessary,  approval of, the
respective  Commissioners  of Insurance of the States of Washington  and Indiana
and such notices and consents as may be required under the insurance laws of any
jurisdiction  in which  ILCO,  FIC or any of their  respective  subsidiaries  is
domiciled or does business,  (iii) the filing of a registration  statement under
the  Securities  Act and any other  filings  required by any state blue sky laws
with respect to the  issuance of shares of FIC Common Stock in the Merger,  (iv)
the Joint Proxy  Statement/Prospectus (as defined in Section 5.1(a)) to be filed
with the SEC by FIC relating to the FIC  Shareholders  Approval,  (v) any filing
required by the Nasdaq  Stock  Market with  respect to the issuance of shares of
FIC Common Stock in the Merger and upon  exercise of Assumed  Stock  Options (as
defined in Section  6.3(a)),  (vi) the filing of such reports under the Exchange
Act as may be required in connection  with this  Agreement and the  transactions
contemplated  by this  Agreement,  (vii) such  filings  and  consents  as may be
required under any environmental,  health or safety law or regulation pertaining
to any notification,  disclosure or required approval triggered by the Merger or
the other transactions  contemplated by this Agreement,  and (viii) such filings
as may be required in  connection  with  statutory  provisions  and  regulations
relating to real property transfer gains Taxes and real property transfer Taxes.

     3.4 FIC SEC Documents.  (a) Since January 1, 1997, FIC and its subsidiaries
have filed  with the SEC all forms,  reports,  schedules,  statements  and other
documents required to be filed by it with the SEC pursuant to the Securities Act
and the  Exchange Act (any such  documents  filed prior to the date hereof being
collectively  referred to as the "FIC SEC  Documents").  The FIC SEC  Documents,
including the financial  statements or schedules  included therein,  at the time
filed, or in the case of registration  statements on their respective  effective
dates, (i) complied in all material respects with the applicable requirements of
the Exchange Act and the Securities Act, as the case may be, and (ii) did not at
the  time  filed  (or in the  case of  registration  statements,  at the time of
effectiveness), contain any untrue statement of a material fact or omit to state
a material fact required to be stated  therein or necessary in order to make the
statements  made therein,  in light of the  circumstances  under which they were
made, not misleading. The financial statements included in the FIC SEC Documents
(the  "FIC  Financial  Statements"),  (i)  have  been  prepared  from and are in
accordance  with,  the  books  and  records  of FIC and its  subsidiaries,  (ii)
complied in all material  respects with applicable  accounting  requirements and
with the published rules and regulations of the SEC with respect thereto,  (iii)
have been prepared in accordance with GAAP during the periods  involved and (iv)
fairly present the consolidated  financial position and the consolidated results
of operations and cash flows of FIC and its subsidiaries as of the times and for
the periods referred to therein,  except that any such FIC Financial  Statements
that are  unaudited,  interim  financial  statements  are  subject to normal and
recurring year-end adjustments.

                                      -22-
(b) FIC has  previously  delivered or made  available to ILCO,  in the form
filed with the SEC (including any amendments thereto), (i) its Annual Reports on
Form 10-K for each of the three fiscal years ended  December 31, 1999,  1998 and
1997,  (ii) all  definitive  proxy  statements  relating  to FIC's  meetings  of
shareholders  (whether  annual or special)  held since January 1, 1997 and (iii)
all other  reports or  registration  statements  filed by FIC with the SEC since
January 1, 1997.

     3.5 Absence of Certain  Changes or Events.  Except as  disclosed in the FIC
SEC  Documents or as disclosed in writing by FIC to ILCO in a disclosure  letter
(the "FIC Disclosure  Letter"),  or as otherwise  agreed to in writing after the
date hereof by ILCO, or as expressly permitted by this Agreement, since December
31, 1999, FIC and its  subsidiaries  have  conducted  their business only in the
ordinary course, and there has not been (a) any change which could reasonably be
expected to have an FIC Material  Adverse  Effect  (including as a result of the
consummation  of the  transactions  contemplated  by  this  Agreement),  (b) any
declaration,  setting  aside or payment of any  dividend  or other  distribution
(whether in cash,  stock or  property)  with  respect to any of FIC's  currently
outstanding capital stock, (c) any split, combination or reclassification of any
of its  outstanding  capital stock or any issuance or the  authorization  of any
issuance of any other  securities  in respect of, in lieu of or in  substitution
for shares of its outstanding  capital stock, (d) (i) any granting by FIC or any
of its  subsidiaries  to any director,  officer or other employee or independent
contractor of FIC or any of its  subsidiaries of any increase in compensation or
acceleration of benefits,  except in the ordinary course of business  consistent
with prior practice or as was required under employment  agreements in effect on
December 31, 1999,  (ii) any granting by FIC or any of its  subsidiaries  to any
director,  officer or other employee or  independent  contractor of any increase
in, or acceleration of benefits in respect of,  severance or termination pay, or
pay in  connection  with any change of control  of FIC,  except in the  ordinary
course of business  consistent  with prior practice or as was required under any
employment,  severance or termination  agreements in effect on December 31, 1999
or (iii)  any  entry  by FIC or any of its  subsidiaries  into  any  employment,
severance,  change of control,  or  termination  or similar  agreement  with any
director,  executive  officer or other employee or independent  contractor other
than in the ordinary course of business  consistent with past practices,  or (e)
any change in accounting  methods,  principles or practices by FIC or any of its
subsidiaries  materially affecting its assets,  liabilities or business,  except
insofar as may have been required by a change in GAAP.

     3.6 No Extraordinary Payments or Change in Benefits. Except as disclosed in
the FIC Disclosure Letter, no current or former director,  officer,  employee or
independent  contractor of FIC or any of its subsidiaries is entitled to receive
any  payment  under  any  agreement,  arrangement  or policy  (written  or oral)
relating  to  employment,  severance,  change  of  control,  termination,  stock
options, stock purchases,  compensation,  deferred compensation, fringe benefits
or other employee benefits currently in effect  (collectively,  the "FIC Benefit
Plans"),  nor will any  benefit  received  or to be  received  by any current or
former director,  officer,  employee or independent  contractor of FIC or any of
its  subsidiaries  under any FIC Benefit Plan be accelerated  or modified,  as a
result  of or  in  connection  with  the  execution  and  delivery  of,  or  the
consummation of the transactions contemplated by, this Agreement.

                                      -23-
3.7 Voting Requirements. The affirmative vote of at least a majority of the
outstanding  shares of FIC Common  Stock  entitled  to vote with  respect to the
approval  of the  Charter  Amendment,  and the  affirmative  vote of at  least a
majority  of the shares of FIC Common  Stock  present (in person or by proxy) at
the FIC  Shareholders  Meeting  with  respect to the  issuance  of shares of FIC
Common  Stock in the  Merger,  are the only votes of the holders of any class or
series of FIC's capital stock necessary to approve the transactions contemplated
by this Agreement.

     3.8 Brokers.  Except as set forth in the FIC Disclosure  Letter, no broker,
finder or investment banker is entitled to any brokerage,  finder's or other fee
or commission in connection with the transactions contemplated hereby based upon
arrangements  made by or on behalf of FIC. A true,  correct and complete copy of
the engagement letter of Philo Smith & Co., Inc. has been delivered to ILCO.

     3.9  Fairness  Opinion.  The special  committee of FIC's Board of Directors
(the "FIC  Special  Committee")  has  received  an opinion of Philo Smith & Co.,
Inc.,  financial  advisor  to the FIC  Special  Committee,  (the  "FIC  Fairness
Opinion"),  to the effect  that the Merger is fair,  from a  financial  point of
view, to the shareholders of FIC.

     3.10 Compliance with Applicable  Laws. Each of FIC and its subsidiaries has
in effect all Permits  necessary for it to own,  lease or operate its properties
and  assets  and to carry on its  business  as now  conducted,  other  than such
Permits  the  absence of which  could  not,  individually  or in the  aggregate,
reasonably  be expected to have an FIC Material  Adverse  Effect,  and there has
occurred  no  default  under any such  Permit  other than such  defaults  which,
individually  or in the  aggregate,  could not reasonably be expected to have an
FIC Material Adverse Effect. FIC and its subsidiaries are in compliance with all
applicable  statutes,  laws,  ordinances,  rules orders and  regulations  of any
Governmental Entity, including without limitation, all applicable federal, state
and local  statutes  and  regulations  regulating  the  business and products of
insurance,  except for such noncompliance which individually or in the aggregate
could not reasonably be expected to have an FIC Material Adverse Effect.

     3.11 Absence of Undisclosed  Liabilities.  Except for liabilities disclosed
in the  FIC SEC  Documents,  liabilities  contemplated  by  this  Agreement  and
liabilities set forth in the FIC Disclosure  Letter, FIC and its subsidiaries do
not have any  material  indebtedness,  obligations  or  liabilities  of any kind
(whether accrued, absolute,  contingent or otherwise) (i) required by GAAP to be
reflected  on  a  consolidated   balance  sheet  of  FIC  and  its  consolidated
subsidiaries  or in the  notes,  exhibits  or  schedules  thereto  or (ii) which
reasonably could be expected to have an FIC Material Adverse Effect.

                                      -24-
3.12 Litigation. Except as disclosed in the FIC SEC Documents or in the FIC
Disclosure Letter, there is no litigation, administrative action, arbitration or
other  proceeding  pending  against  FIC or any of its  subsidiaries  or, to the
knowledge of FIC,  threatened  that,  individually  or in the  aggregate,  could
reasonably  be  expected  to (i) have an FIC  Material  Adverse  Effect  or (ii)
prevent,   or   significantly   delay  the   consummation  of  the  transactions
contemplated  by this  Agreement.  Except as set forth in the FIC SEC Documents,
there is no judgment,  order,  injunction or decree of any  Governmental  Entity
outstanding against FIC or any of its subsidiaries that,  individually or in the
aggregate,  could  reasonably be expected to have any effect  referred to in the
foregoing clauses (i) and (ii) of this Section 3.12.

     3.13 Transactions with Affiliates. Other than the transactions contemplated
by this Agreement or except to the extent  disclosed in the FIC SEC Documents or
as set forth in the FIC  Disclosure  Letter,  there  have been no  transactions,
agreements,  arrangements or understandings between FIC or its subsidiaries,  on
the one hand, and FIC's affiliates (other than subsidiaries of FIC) or any other
person, on the other hand, that would be required to be disclosed under Item 404
of Regulation S-K under the Securities Act.

     3.14 FIC Common  Stock.  The shares of FIC Common Stock to be issued in the
Merger will be, upon delivery against receipt of the shares of ILCO Common Stock
for which such  shares  will be issued in  accordance  with  Section 1.8 of this
Agreement,  duly authorized,  validly issued, fully paid and nonassessable.  The
shares of FIC Common  Stock to be issued  upon  exercise  of the  Assumed  Stock
Options (as defined in Section  6.2(a))  will be, upon  delivery of the exercise
price  therefor in  accordance  with the terms of the ILCO Stock Option Plan and
agreements  pursuant to which such  Assumed  Stock  Options  were  issued,  duly
authorized, validly issued, fully paid and nonassessable.

     3.15 Employee  Arrangements  and Benefit Plans.  (a) Except as set forth in
the FIC SEC Documents or in the FIC  Disclosure  Letter and except as could not,
individually or in the aggregate, reasonably be expected to have an FIC Material
Adverse  Effect:  (i) each FIC  Benefit  Plan  has been  administered  and is in
compliance  with the  terms of such  plan and all  applicable  laws,  rules  and
regulations, (ii) no "reportable event" (as such term is used in section 4043 of
ERISA)  (other  than those  events  for which the 30 day notice has been  waived
pursuant to the regulations),  "prohibited transaction" (as such term is used in
section  406 of ERISA or  section  4975 of the  Code)  or  "accumulated  funding
deficiency"  (as  such  term is used in  section  412 or 4971 of the  Code)  has
heretofore  occurred  with  respect to any FIC  Benefit  Plan and (iii) each FIC
Benefit Plan intended to qualify under Section 401(a) of the Code has received a
favorable  determination  from the IRS regarding its  qualified  status,  or the
remedial amendment period under Section 401(b) of the Code will not have expired
prior to the Closing  Date,  and no notice has been  received  from the IRS with
respect to the revocation of such qualification.

                                      -25-
(b) There is no litigation or administrative or other proceeding  involving
any FIC Benefit Plan or Employment  Arrangement nor has FIC or its  subsidiaries
received  written notice that any such  proceeding is  threatened,  in each case
where an adverse  determination  could  reasonably  be  expected  to have an FIC
Material  Adverse Effect.  Neither FIC nor any of its subsidiaries has incurred,
nor,  to the  best of  FIC's  knowledge,  is  reasonably  likely  to  incur  any
withdrawal   liability   under  Section  4201  of  ERISA  with  respect  to  any
"multiemployer  plan"  (within  the  meaning  of section  3(37) of ERISA)  which
remains  unsatisfied in an amount which could  reasonably be expected to have an
FIC Material  Adverse Effect.  The  termination of, or withdrawal  from, any FIC
Benefit Plan or multiemployer plan to which FIC or its subsidiaries contributes,
on or prior to the Closing Date, will not subject FIC or any of its subsidiaries
to any  liability  under Title IV of ERISA that could  reasonably be expected to
have an FIC Material Adverse Effect.

     3.16 Tax Matters.  FIC and each of its  subsidiaries  have timely filed (or
been  included in a  consolidated,  combined or unitary Tax Return that has been
timely  filed) with the  appropriate  Governmental  Entities  all  material  Tax
Returns  required  to be filed  through the date hereof and will timely file any
such  material Tax Returns  required to be filed on or prior to the Closing Date
(except  those under valid  extension)  and all such Tax Returns are and will be
true and correct in all material  respects.

          (b) all material Taxes of FIC and each of its  subsidiaries  have been
     or will be timely paid or adequately  reserved for in accordance  with GAAP
     in the Financial Statements.

          (c) FIC and its  subsidiaries  have complied in all material  respects
     with all applicable laws, rules and regulations relating to the withholding
     of Taxes.

          (d) Except as set forth in the FIC Disclosure Letter:

               (i) no material  deficiencies  for any Taxes have been  proposed,
          asserted or assessed against FIC or any of its subsidiaries  that have
          not been  fully paid or  adequately  provided  for in the  appropriate
          financial  statements  of FIC and its  subsidiaries,  and no  material
          issues   relating  to  Taxes  have  been  raised  in  writing  by  any
          Governmental Entity during any presently pending audit or examination;

               (ii) FIC and its subsidiaries are not now subject to audit by any
          Governmental  Entity and no waivers of  statutes  of  limitation  with
          respect to the Tax Returns  have been given by or requested in writing
          from FIC or any of its subsidiaries;

               (iii) there are no material Liens for Taxes (other than for Taxes
          not  yet  due  and  payable)  on  any  assets  of  FIC  or  any of its
          subsidiaries;

               (iv)  neither  FIC nor any of its  subsidiaries  is a party to or
          bound by (nor will any of them  become a party to or bound by) any Tax
          indemnity,   Tax  sharing,  Tax  allocation,   or  similar  agreement,
          arrangement   or  practice   with  respect  to  Taxes,   except  among
          themselves;

               (v)  neither  FIC nor any of its  subsidiaries  has  ever  been a
          member of an affiliated  group of  corporations  within the meaning of
          Section 1504 of the Code, other than the affiliated group of which FIC
          is the common parent;

               (vi) neither FIC nor any of its  subsidiaries has agreed to make,
          nor is any required to make,  any  adjustment  under Section 481(a) of
          the Code or any similar  provision  of state,  local or foreign law by
          reason of a change in accounting method or otherwise;

                                      -26-
(vii) neither FIC nor any of its  subsidiaries has received a Tax
          ruling  from  any  Governmental  Entity,  or  entered  into a  closing
          agreement with any Governmental  Entity,  that would have a continuing
          material effect after the Closing Date; and

               (viii) neither FIC nor any of its  subsidiaries is a party to any
          contract,  agreement  or other  arrangement  which would result in the
          payment of amounts that could be  nondeductible  by reason of Sections
          280G or 162(m) of the Code.

     (e) No  portion  of either  FIC or any of its  subsidiaries  is or has ever
been, a "taxable mortgage pool" as defined in Section 7701(i) of the Code.

     (f) For the taxable  period  ending on the  Closing  Date and for all prior
taxable  periods for which the statute of  limitations  has not expired,  Family
Life (i) qualifies (and qualified) as an "insurance  company" within the meaning
of Treasury  Regulation  Section  1.801- 3(a) (under  former  Section 801 of the
Code) and as a "life insurance  company" within the meaning of Section 816(a) of
the Code, and (ii) are (and were) subject to taxation under  Subchapter L of the
Code.

     (g) The  insurance  reserves and unearned  premiums with respect to FIC and
each of its  subsidiaries set forth in all their federal Tax Returns as to which
the statute of  limitations  has not expired  were  determined  in all  material
respects in accordance with Section 807 of the Code.

     (h) The unpaid losses with respect to FIC and each of its  subsidiaries set
forth in all of their federal Tax Returns as to which the statute of limitations
has not expired were based upon  reasonable  estimations  and were discounted in
all material respects in accordance with Section 846 of the Code.

     (i) Each  life  insurance  policy  and  annuity  contract  issued,  sold or
administered  by  FIC  or  any of  its  subsidiaries,  at  all  relevant  times,
satisfied, and does satisfy, the requirements of, and/or has qualified, and does
qualify, under, Sections 72, 264, 401(a),403(a), 403(b), 817, 7702, 7702A of the
Code and the  Treasury  Regulations  thereunder,  as  applicable,  except to the
extent that failures to satisfy or qualify in the aggregate,  were such failures
tripled, would not result in any FIC Material Adverse Effect.

     (j)  FIC has not  constituted  either  a  "distributing  corporation"  or a
"controlled  corporation"  (within  the meaning of Section  355(a)(1)(A)  of the
Code) in a distribution of stock qualifying for tax-free treatment under Section
355 of the Code (i) in the two years prior to the date of this Agreement or (ii)
in a distribution  which could otherwise  constitute part of a "plan" or "series
of related  transactions"  (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.

                                      -27-
(k)  Neither  FIC nor any of its  subsidiaries  knows of any fact,  plan or
circumstance  that is reasonably likely to prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code.

     3.17  Intellectual  Property.  Except  as set  forth in the FIC  Disclosure
Letter and except to the extent of any  inaccuracy  of any of the  following (or
the circumstances giving rise to such inaccuracy) which,  individually or in the
aggregate,  could not  reasonably  be expected to have an FIC  Material  Adverse
Effect:  (a) FIC and each of its  subsidiaries  owns,  or is licensed to use (in
each case, free and clear of any Liens),  all  Intellectual  Property used in or
necessary for the conduct of its business as currently conducted; (b) the use of
any Intellectual  Property by FIC and its  subsidiaries  does not infringe on or
otherwise  violate  the  rights  of any  person  and is in  accordance  with any
applicable license pursuant to which FIC or any subsidiary acquired the right to
use any  Intellectual  Property;  and (c) to the  knowledge of FIC, no person is
challenging, infringing on or otherwise violating any right of FIC or any of its
subsidiaries with respect to any Intellectual  Property owned by and/or licensed
to FIC or its subsidiaries;  and (d) neither FIC nor any of its subsidiaries has
received  any  written   notice  of  any  pending  claim  with  respect  to  any
Intellectual  Property used by FIC and its  subsidiaries and to its knowledge no
Intellectual  Property owned and/or licensed by FIC or its subsidiaries is being
used or enforced in a manner that would result in the abandonment,  cancellation
or unenforceability of such Intellectual Property.

     3.18 Environmental Matters. Except as disclosed in the FIC SEC Documents or
as set forth in the FIC Disclosure  Letter and except as could not reasonably be
expected to have an FIC Material  Adverse  Effect (a) the  operations of FIC and
its subsidiaries have been and are in compliance with all Environmental Laws and
with all Permits required by Environmental Laws, (b) there are no pending or, to
the knowledge of FIC,  threatened,  Actions  under or pursuant to  Environmental
Laws against FIC or its  subsidiaries  or involving any real property  currently
or, to the knowledge of FIC,  formerly  owned,  operated or leased by FIC or its
subsidiaries,  (c) FIC and its subsidiaries are not subject to any Environmental
Liabilities, and, to the knowledge of FIC, no facts, circumstances or conditions
relating to, arising from,  associated with or attributable to any real property
currently or, to the knowledge of FIC, formerly owned, operated or leased by FIC
or its  subsidiaries or operations  thereon that could reasonably be expected to
result in  Environmental  Liabilities,  (d) all real property owned,  and to the
knowledge  of  FIC,  all  real  property  operated  or  leased  by  FIC  or  its
subsidiaries is free of contamination  from Hazardous  Material and (e) there is
not now,  nor, to the  knowledge of FIC,  has there been in the past,  on, in or
under  any  real  property  owned,  leased  or  operated  by  FIC  or any of its
predecessors  (i) any  underground  storage tanks,  above-ground  storage tanks,
dikes   or   impoundments    containing    Hazardous    Materials,    (ii)   any
asbestos-containing  materials, (iii) any polychlorinated biphenyls, or (iv) any
radioactive substances.

     3.19 State Takeover Statutes.  No state takeover statute or similar statute
or regulation applies or purports to apply to the Merger,  this Agreement or any
of the  transactions  contemplated  by this  Agreement  and no  provision of the
Articles of Incorporation, Bylaws or other governing instrument of FIC or any of
its subsidiaries would,  directly or indirectly,  restrict or impair the ability
of FIC to consummate the transactions contemplated by this Agreement.

                                      -28-
3.20 Labor Matters.  Except as set forth in the FIC SEC Documents or in the
FIC Disclosure Letter, (a) neither FIC nor any of its subsidiaries is a party to
any labor or collective bargaining agreement,  and no employees of FIC or any of
its subsidiaries are represented by any labor organization, (b) to the knowledge
of FIC, there are no material  representation or certification  proceedings,  or
petitions  seeking a  representation  proceeding,  pending or  threatened  to be
brought or filed with the  National  Labor  Relations  Board or any other  labor
relations  tribunal or authority and (c) to the  knowledge of FIC,  there are no
material  organizing  activities  involving FIC or any of its subsidiaries  with
respect to any group of employees of FIC or its subsidiaries.

     3.21  Material  Contracts.  (a)  Except as set forth in the FIC  Disclosure
Letter,  all contracts and agreements of the FIC and its  subsidiaries  that are
required to be  described  in the FIC SEC  Documents  or to be filed as exhibits
thereto are  described  in the FIC SEC  Documents  or filed as exhibits  thereto
("FIC Material Contracts"),  respectively, and are in full force and effect and,
upon  consummation of the transactions  contemplated  hereby,  shall continue in
full force and effect without  penalty,  acceleration,  termination,  repurchase
right  or  other  adverse  consequence.  FIC has  previously  delivered  or made
available to ILCO,  true,  correct and complete  copies of all such FIC Material
Contracts. Neither FIC nor any of its subsidiaries, nor to the knowledge of FIC,
any  other  party is in  breach of or in  default  under  any such FIC  Material
Contract and no event has occurred  that with the lapse of time or the giving of
notice or both would constitute a default thereunder by FIC or, to the knowledge
of FIC, any other party thereto, in any such case in which such default or event
could reasonably be expected to have an FIC Material Adverse Effect. Neither FIC
nor any  subsidiary of FIC has received any written  notice (or to the knowledge
of FIC any other  notice)  of  default  or  termination  under any FIC  Material
Contract,  and to the knowledge of FIC,  there exists no basis for any assertion
of a right of default or termination under such FIC Material Contracts.

     3.22 Tangible  Property.  All of the assets of FIC and its subsidiaries are
in good operating  condition,  reasonable wear and tear excepted,  and usable in
the  ordinary  course  of  business,  except  where  the  failure  to be in such
condition or so usable could not,  individually or in the aggregate,  reasonably
be expected to have an FIC Material Adverse Effect.

     3.23 Insurance Business.

          (a) Except as otherwise  could not,  individually or in the aggregate,
     reasonably  be  expected  to  have  an FIC  Material  Adverse  Effect,  all
     policies,  binders,  slips,  certificates,  guaranteed insurance contracts,
     annuity  contracts and  participation  agreements  and other  agreements of
     insurance,  whether  individual  or group,  in effect as of the date hereof
     (including  all  applications,   supplements,   endorsements,   riders  and
     ancillary  agreements  in connection  therewith)  that are issued by Family
     Life Insurance  Company  ("Family Life") or any predecessor of Family Life,
     and any and all  marketing  materials,  are, to the extent  required  under
     applicable  law,  on forms  approved  by  applicable  insurance  regulatory
     authorities  or  which  have  been  filed  and  not  objected  to  by  such
     authorities  within the period  provided for objection,  and such forms and
     marketing  materials  comply in all material  respects  with the  insurance
     statutes, regulations and rules applicable thereto.

                                      -29-
(b) FIC has  delivered or made  available to ILCO a true,  correct and
     complete copy of all actuarial reports prepared by FIC's actuaries, and any
     actuarial  reports prepared by other  actuaries,  independent or otherwise,
     with  respect to Family Life since  January 1, 1998,  and all  attachments,
     addenda,   supplements  and  modifications   thereto  (the  "FIC  Actuarial
     Analyses").  To the knowledge of FIC, the information and data furnished by
     FIC or Family Life to its  independent  actuaries  in  connection  with the
     preparation  of the FIC  Actuarial  Analyses  were accurate in all material
     respects.  Furthermore,  each FIC  Actuarial  Analysis  was  based  upon an
     accurate  inventory of policies in force for Family  Life,  at the relevant
     time of preparation,  was prepared using  appropriate  modeling  procedures
     accurately  applied and in conformity  with  generally  accepted  actuarial
     standards  consistently applied, and the projections contained therein were
     properly prepared in accordance with the assumptions stated therein.

          (c) To the knowledge of FIC, except as set forth in the FIC Disclosure
     Letter or as reserved  for or  disclosed  in the FIC SEC  Documents,  or as
     could not, individually or in the aggregate, reasonably be expected to have
     an FIC Material Adverse Effect, all amounts  recoverable under reinsurance,
     coinsurance  or other  similar  contracts  to which  Family Life is a party
     (including,  but not limited to,  amounts based on paid and unpaid  losses)
     are fully collectible.

          (d) FIC has  delivered  or made  available  to ILCO true,  correct and
     complete copies of all analyses,  reports and other data prepared by FIC or
     Family Life or submitted by FIC or Family Life to any insurance  regulatory
     authority or received by FIC or Family Life relating to risk-based  capital
     calculations or IRIS ratios of the years ended December 31, 1999 and 1998.

          (e) FIC has  delivered or made  available to ILCO a true,  correct and
     complete list on a per risk and aggregate  basis of the maximum  underlying
     retentions  (net  of  all  reinsurance  maintained)  on all  insurance  and
     reinsurance  policies written or entered into by Family Life since December
     31, 1999.

          (f) Except as could not, individually or in the aggregate,  reasonably
     be expected to have an FIC Material Adverse Effect,  all annuity  contracts
     and life insurance  policies issued by Family Life meet all definitional or
     other requirements for qualification  under the Code section applicable (or
     intended to be  applicable)  to such annuity  contracts  or life  insurance
     policies.

          (g)  Except  as set  forth  the FIC  Disclosure  Letter,  there are no
     material  "hold  harmless"  indemnification  agreements  respecting the Tax
     qualification  or  treatment of any product or plan sold,  issued,  entered
     into or administered by Family Life, and there have been no claims asserted
     by any person under such "hold harmless" indemnification agreements.

     3.24 Liabilities and Reserves.

          (a) Except as set forth in the FIC  Disclosure  Letter,  the  reserves
     carried on the books of Family Life for future  insurance  policy benefits,
     losses,  claims and similar  purposes were, as of the  respective  dates of
     such FIC financial  statements  required to be submitted to the appropriate
     regulatory  authority of the jurisdiction in which Family Life is domiciled
     on forms  prescribed  or permitted by such  authority in  compliance in all
     material  respects with the  requirements  for reserves  established by the
     insurance  department  of the  state  of  domicile  of  Family  Life,  were
     determined in all material  respects in accordance with generally  accepted
     actuarial  standards  consistently  applied,  and were fairly stated in all
     material   respects  in  accordance  with  sound  actuarial  and  statutory
     accounting  principles.  FIC has delivered or made  available to ILCO true,
     correct  and  complete  copies of the Annual  Statements  delivered  to the
     insurance  department of the domiciliary state of Family Life for the years
     ended  December 31, 1999 and 1998.  FIC has delivered or made  available to
     ILCO  copies of all work  papers  used as the basis  for  establishing  the
     reserves  for Family  Life at  December  31, 1999 and  December  31,  1998,
     respectively,  as well as all reports  with respect to the adequacy of such
     reserves.

                                      -30-
(b) Except for regular periodic  assessments in the ordinary course of
     business or as reserved for or disclosed in the FIC SEC Documents, no claim
     or assessment is pending nor, to the knowledge of FIC,  threatened  against
     Family Life by any state insurance guaranty associations in connection with
     such  association's fund relating to insolvent insurers which if determined
     adversely, could, individually or in the aggregate,  reasonably be expected
     to have an FIC Material Adverse Effect.

                                   ARTICLE IV
                  REPRESENTATIONS AND WARRANTIES OF MERGER SUB

FIC and Merger Sub represent and warrant to ILCO as follows:

     4.1 Organization,  Standing and Corporate Power Merger Sub is a corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
State of Texas and has the requisite  corporate  power and authority to carry on
its business as now being conducted. Merger Sub is duly qualified to do business
and in good standing in each jurisdiction in which the nature of its business or
the  ownership  or  leasing  of its  properties  would  make such  qualification
necessary,  except where the failure to be so qualified  could not reasonably be
expected to have a FIC Material Adverse Effect.

     4.2 Capital Structure.  The authorized capital stock of Merger Sub consists
of 1,000 shares of common  stock,  $0.01 par value,  all of which are issued and
outstanding  and owned of record and  beneficially by FIC, free and clear of all
Liens.  All  outstanding  shares  of  capital  stock  of  Merger  Sub  are  duly
authorized,  validly  issued,  fully paid and  nonassessable  and not subject to
preemptive   rights.   Merger  Sub  has  no   outstanding   options,   warrants,
subscriptions  or other rights,  agreements or commitments  that obligates it to
issue,  sell or transfer,  repurchase,  redeem or otherwise  acquire or vote any
shares of the capital stock of Merger Sub.

     4.3  Authority;  Noncontravention.  Merger Sub has all requisite  corporate
power  and  authority  to  enter  into  this  Agreement  and to  consummate  the
transactions  contemplated by this Agreement. The execution and delivery of this
Agreement  by  Merger  Sub  and  the  consummation  by  it of  the  transactions
contemplated  by this  Agreement,  have been duly  authorized  by all  necessary
corporate action on the part of Merger Sub, including all necessary  stockholder
approval.  This  Agreement  has been duly  executed and delivered by Merger Sub,
and, assuming this Agreement  constitutes the valid and binding agreement of FIC
and ILCO,  constitutes a valid and binding  obligation of Merger Sub enforceable
against it in accordance with its terms except that the enforcement  thereof may
be limited by (a) bankruptcy, insolvency, reorganization,  moratorium or similar
laws now or hereafter in effect relating to creditor's  rights generally and

                                      -31-
(b)  general  principles  of equity  (regardless  of whether  enforceability  is
considered in a proceeding  at law or in equity).  The execution and delivery of
this Agreement do not, and the consummation of the transactions  contemplated by
this  Agreement and  compliance  with the provisions of this Agreement will not,
(i) conflict  with any of the  provisions  of the Articles of  Incorporation  or
Bylaws of Merger  Sub,  or (ii)  subject to the  governmental  filings and other
matters  referred to in the  following  sentence,  contravene  any law,  rule or
regulation  of any state or of the United  States or any  political  subdivision
thereof  or  therein,  or  any  order,  writ,  judgment,   injunction,   decree,
determination   or  award   currently  in  effect.   No  consent,   approval  or
authorization  of, or declaration or filing with, or notice to, any Governmental
Entity  which has not been  received or made is  required by or with  respect to
Merger Sub in connection with the execution and delivery of this Agreement by it
or  the  consummation  by it of any of the  transactions  contemplated  by  this
Agreement,  except for (i) the filing of premerger notification and report forms
under the HSR Act with  respect  to the Merger  and the  termination  or earlier
expiration of the applicable  waiting periods  thereunder and (ii) the filing of
articles of merger with the Texas Secretary of State.

     4.4 No Prior  Activities.  Except  for this  Agreement,  Merger Sub (i) was
recently formed,  (ii) has not entered into any agreements or arrangements  with
any  person  and  (iii)  is  not  subject  to or  bound  by  any  obligation  or
undertaking.  Except  as  contemplated  by this  Agreement,  Merger  Sub has not
engaged, directly or indirectly, in any business activities of any type or kind.

                                   ARTICLE V
                             ADDITIONAL AGREEMENTS

     5.1   Preparation  of  Form  S-4  and  Joint  Proxy   Statement/Prospectus;
Information Supplied.

     (a) As soon as practicable  following the date of this  Agreement,  (i) FIC
and  ILCO  shall  prepare  and  file  with  the SEC a  preliminary  Joint  Proxy
Statement/Prospectus  ("Joint  Proxy  Statement/Prospectus")  and (ii) FIC shall
prepare and file with the SEC a  Registration  Statement  on Form S-4 (the "Form
S-4") with respect to the  registration  of the issuance of shares of FIC Common
Stock in the Merger, of which the Joint Proxy  Statement/Prospectus  will form a
part.  FIC shall use its  commercially  reasonable  efforts to have the Form S-4
declared  effective  under the Securities  Act as promptly as practicable  after
such  filing.  Each of FIC and ILCO  shall  use  their  commercially  reasonable
efforts  to cause the  Joint  Proxy  Statement/Prospectus  to be mailed to FIC's
shareholders and ILCO's  shareholders as promptly as practicable  after the Form
S-4 is declared  effective  under the  Securities  Act.  FIC shall also take any
action (other than qualifying to do business in any  jurisdiction in which it is
not now so qualified or take any action that would  subject it to the service of
process in suits, other than as to matters and transactions relating to the Form
S-4, in any jurisdiction  where it is not so subject) required to be taken under
any applicable  state securities laws in connection with the issuance of the FIC
Common  Stock in the Merger and ILCO shall  furnish all  information  concerning
itself  and the  holders  of shares of ILCO  Common  Stock as may be  reasonably
requested in connection with any such action.

                                      -32-
(b) ILCO  agrees and  represents  and  warrants  that the  information
     supplied  or  to  be  supplied  by  it   specifically   for   inclusion  or
     incorporation  by  reference  in the (i) Form S-4 will not, at the time the
     Form S-4 is filed with the SEC,  at any time it is amended or  supplemented
     or at the time it becomes  effective under the Securities Act,  contain any
     untrue  statement  of a material  fact or omit to state any  material  fact
     required to be stated  therein or necessary in order to make the statements
     therein,  in light of the  circumstances  under  which  they are made,  not
     misleading,  or (ii) the Joint Proxy  Statement/Prospectus will not, at the
     date it is first  mailed  to FIC's  shareholders  or at the time of the FIC
     Shareholders Meeting, contain any statement which, at the time and in light
     of the  circumstances  under which it is made, is false or misleading  with
     respect to any material fact, or omits to state any material fact necessary
     in  order  to make the  statements  therein  not  false  or  misleading  or
     necessary  to correct  any  statement  in any  earlier  communication  with
     respect  to the  solicitation  of a proxy for the same  meeting  or subject
     matter thereof which has become false or  misleading.  ILCO agrees that the
     Joint Proxy  Statement/Prospectus  will  comply as to form in all  material
     respects  with the  requirements  of the  Exchange  Act and the  rules  and
     regulations  promulgated  thereunder,  except in each case with  respect to
     statements   made  or   incorporated   by  reference  in  the  Joint  Proxy
     Statement/Prospectus   supplied  by  FIC   specifically  for  inclusion  or
     incorporation   by   reference   therein  as  to  which  ILCO   assumes  no
     responsibility.

          (c) FIC  agrees  and  represents  and  warrants  that the  information
     supplied  or  to  be  supplied  by  it   specifically   for   inclusion  or
     incorporation  by  reference  in (i) the Form S-4 will not, at the time the
     Form S-4 is filed with the SEC,  at any time it is amended or  supplemented
     or at the time it becomes  effective under the Securities Act,  contain any
     untrue  statement  of a material  fact or omit to state any  material  fact
     required to be stated  therein or necessary in order to make the statements
     therein,  in light of the  circumstances  under  which  they are made,  not
     misleading,  or (ii) the Joint Proxy  Statement/Prospectus will not, at the
     date it is first mailed to ILCO's  shareholders  or at the time of the ILCO
     Shareholders Meeting, contain any statement which, at the time and in light
     of the  circumstances  under which it is made, is false or misleading  with
     respect to any material fact, or omits to state any material fact necessary
     in  order  to make the  statements  therein  not  false  or  misleading  or
     necessary  to correct  any  statement  in any  earlier  communication  with
     respect  to the  solicitation  of a proxy for the same  meeting  or subject
     matter  thereof which has become false or  misleading.  FIC agrees that the
     Form  S-4  will  comply  as to  form  in all  material  respects  with  the
     requirements   of  the  Securities  Act  and  the  rules  and   regulations
     promulgated    thereunder   and   FIC   agrees   that   the   Joint   Proxy
     Statement/Prospectus  will comply as to form in all material  respects with
     the  requirements  of the  Exchange  Act  and  the  rules  and  regulations
     promulgated thereunder, except in each case with respect to statements made
     or   incorporated  by  reference  in  the  Form  S-4  or  the  Joint  Proxy
     Statement/Prospectus   supplied  by  ILCO  specifically  for  inclusion  or
     incorporation   by   reference   therein   as  to  which  FIC   assumes  no
     responsibility.

     5.2  Shareholder  Approval.

     (a) ILCO agrees that it will take all action  necessary in accordance  with
applicable law and its Articles of Incorporation and Bylaws to convene a meeting
of its shareholders (the "ILCO Shareholders  Meeting") to submit this Agreement,
together  (subject to Section 5.5(b) below) with the affirmative  recommendation
of the  ILCO  Special  Committee  and  ILCO's  Board  of  Directors,  to  ILCO's
shareholders  so that  they may  consider  and vote  upon the  approval  of this
Agreement and the Merger. ILCO will use its

                                      -33-
commercially reasonable efforts to hold the ILCO Shareholders Meeting and obtain
the ILCO Shareholders Approval as soon as practicable after the date hereof and,
so long as the  recommendation  of the ILCO  Special  Committee  or the Board of
Directors of ILCO has not been withdrawn or modified in accordance  with Section
5.5(b),  to  obtain  the  favorable  votes of its  shareholders.  Except  as may
otherwise be permitted by Section  5.5(b),  the ILCO Special  Committee  and the
Board of Directors of ILCO shall recommend to its shareholders that they vote in
favor of the  approval and adoption of this  Agreement  and the Merger.  Without
limiting  the  generality  of the  foregoing,  ILCO  agrees  that,  unless  this
Agreement is first  terminated in accordance  with Section 8.1, its  obligations
pursuant to the first two sentences of this Section 5.2(a) shall not be affected
by (i) the commencement,  public proposal, public disclosure or communication to
ILCO of any  Acquisition  Proposal (as defined in Section  5.5(c) below) or (ii)
the withdrawal or modification by the Board of Directors of ILCO of its approval
or  recommendation  of this  Agreement  or the Merger,  except with respect to a
withdrawal or modification of the affirmative recommendation of the ILCO Special
Committee or the Board of Directors of ILCO in accordance with Section 5.5(b).

     (b) FIC agrees that it will take all action  necessary in  accordance  with
applicable law and its Articles of Incorporation and Bylaws to convene a meeting
of its shareholders (the "FIC  Shareholders  Meeting") to submit the issuance of
shares of FIC Common Stock pursuant to this Agreement and the Charter Amendment,
together with the affirmative recommendation of FIC's Board of Directors, to the
FIC's  shareholders  so that they may consider and vote upon the approval of the
issuance of shares of FIC Common Stock in the Merger and the Charter  Amendment.
FIC will use its  commercially  reasonable  efforts to hold the FIC Shareholders
Meeting as soon as practicable after the date hereof and to obtain the favorable
votes of its shareholders.  The Board of Directors of FIC shall recommend to its
shareholders  that they vote in favor of the  approval of the issuance of shares
of FIC Common Stock in the Merger and the Charter Amendment.

     5.3 Access to Information; Confidentiality. Upon reasonable notice, each of
FIC and ILCO shall,  and shall cause each of their  respective  subsidiaries to,
afford to the other parties hereto and to their respective officers,  employees,
counsel,  financial advisors and other representatives  reasonable access during
normal  business  hours during the period prior to the Effective Time to all its
properties,  books,  contracts,  commitments,  personnel and records and, during
such  period,  each of FIC  and  ILCO  shall,  and  shall  cause  each of  their
respective  subsidiaries  to,  furnish as promptly as  practicable  to the other
parties hereto such information concerning its business,  properties,  financial
condition,  operations  and  personnel  as such  parties  may from  time to time
reasonably request. Except as required by law or the rules of regulations of the
Nasdaq Stock Market or any national stock  exchange,  each of FIC and ILCO agree
that,  until the  earlier of (i) two years from the date of this  Agreement  and
(ii) the Effective Time, each of FIC and ILCO and their respective  subsidiaries
will  not,  and  will  cause  its  respective  directors,   officers,  partners,
employees,   agents,   accountants,   counsel,   financial  advisors  and  other
representatives  and  affiliates   (collectively,   "Representatives")  not  to,
disclose any  nonpublic  information  obtained from FIC or ILCO, as the case may
be, to any other person, in whole or in part, other than to its  Representatives
in  connection  with an  evaluation  of the  transactions  contemplated  by this
Agreement,  and each of FIC and ILCO and their respective subsidiaries will not,
and will cause its respective  Representatives not to, use any of such nonpublic
information to directly or indirectly  divert or attempt to divert any business,
customer or employee of the other.

                                      -34-
5.4 Public Announcements. Each of FIC and ILCO agree that they will consult
with each other before  issuing,  and will provide each other the opportunity to
review and comment  upon,  any press  release or other  public  statements  with
respect  to the  transactions  contemplated  by this  Agreement,  including  the
Merger,  and  shall not issue any such  press  release  or make any such  public
statement  prior to such  consultation,  except as may be required by applicable
law,  court  process  or by  obligations  pursuant  to  rules  of  any  national
securities  exchange or The Nasdaq  Stock  Market (to the extent  applicable  to
them).  Notwithstanding  the foregoing,  each of FIC and ILCO shall,  before the
opening of business on the day after the  execution of this  Agreement,  issue a
press release describing the terms and conditions of the Merger;  provided, that
the form and  content of any such press  release is  acceptable  to both FIC and
ILCO, which acceptance shall not be unreasonably withheld or delayed.

     5.5 Acquisition Proposals.

     (a) From and after the date hereof,  without the prior  written  consent of
FIC, ILCO shall not, and shall not  authorize or permit any of its  subsidiaries
to, and shall direct and use its best efforts to cause its and its subsidiaries'
Representatives  not to,  (i)  directly  or  indirectly,  solicit,  initiate  or
encourage (including by way of furnishing information or assistance) or take any
other action to  facilitate  any  inquiries or the making of any proposal  which
constitutes or may reasonably be expected to lead to an Acquisition Proposal (as
defined  below)  or  (ii)  enter  into  or  participate  in any  discussions  or
negotiations  regarding any Acquisition  Proposal.  ILCO shall immediately cease
and terminate any existing solicitation,  initiation,  encouragement,  activity,
discussion or  negotiation  with any persons  conducted  heretofore by it or its
Representatives with respect to the foregoing. Notwithstanding the foregoing and
anything to the contrary contained in this Section 5.5 or in any other provision
of  this  Agreement,  ILCO  and  its  Board  of  Directors  may  participate  in
discussions  or  negotiations   (including,   as  a  part  thereof,  making  any
counterproposal)  with or  furnish  information  to any  third  party  making an
unsolicited   Acquisition  Proposal  (a  "Potential  Acquiror")  or  approve  an
unsolicited  Acquisition  Proposal  if the  Board  of  Directors  of ILCO or any
special  committee  thereof  is  advised  by its  financial  advisor  that  such
Potential  Acquiror has the financial  wherewithal  to be reasonably  capable of
consummating  such an Acquisition  Proposal,  and the Board of Directors of ILCO
determines in good faith (A) after receiving advice from such financial advisor,

                                      -35-
that such third party has submitted to ILCO an  Acquisition  Proposal which is a
Superior  Proposal  (as  defined in Section  5.5(d)  below),  and (B) based upon
advice of  outside  legal  counsel,  that the  failure  to  participate  in such
discussions  or  negotiations  or to  furnish  such  information  or  approve an
Acquisition Proposal would violate the Board's fiduciary duties under applicable
law.  ILCO  agrees  that any  non-public  information  furnished  to a Potential
Acquiror   will  be  pursuant   to  a   confidentiality   agreement   containing
confidentiality  and  standstill  provisions.  In  the  event  that  ILCO  shall
determine to provide any  information as described  above,  or shall receive any
Acquisition  Proposal,  it shall  promptly  inform FIC in writing as to the fact
that  information  is to be provided  and shall  furnish FIC the identity of the
recipient of such  information  and/or the  Potential  Acquiror and the terms of
such Acquisition Proposal. ILCO will inform FIC promptly of any material changes
or amendment  to the  essential  terms of any such  Acquisition  Proposal.  ILCO
expressly agrees and acknowledges that (i) nothing contained in this Section 5.5
shall in any way be construed to be an authorization by FIC of the acceptance of
any Superior  Proposal,  it being  understood  that FIC expressly  disclaims any
implication  that FIC may be deemed to have  consented  to the  acceptance  of a
Superior  Proposal by virtue of the  provisions of this Section 5.5 and (ii) the
sole purpose of this Section 5.5 is to permit the  termination of this Agreement
by ILCO in accordance  with Section  8.1(b)(vii) in the event the conditions set
forth in this Section 5.5 are satisfied.

     (b) Neither the Board of Directors of ILCO nor any committee  thereof shall
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to
FIC,  the  approval or  recommendation  by such Board of  Directors or committee
thereof of this Agreement or the Merger,  (ii) approve or recommend,  or propose
to approve or recommend,  any Acquisition  Proposal or (iii) cause ILCO to enter
into any letter of intent,  agreement  in  principle,  acquisition  agreement or
other similar agreement related to any Acquisition Proposal;  provided, however,
that the Board of  Directors  or any  committee  thereof may  withdraw or modify
their approval or  recommendation of this Agreement or the Merger and approve or
recommend an Acquisition Proposal in the event that the Board determines in good
faith  (A)  after  receiving  advice  from  its  financial  advisor,  that  such
Acquisition Proposal is a Superior Proposal and (B) based upon advice of outside
legal counsel, that the failure to take such action would violate the Board's or
any such committee's fiduciary duties under applicable law.

     (c) For purposes of this  Agreement,  an  "Acquisition  Proposal" means any
proposal or offer from any person  (other  than FIC or any of its  subsidiaries)
for  a  tender  or  exchange  offer,  merger,   consolidation,   other  business
combination,  recapitalization,  liquidation, dissolution or similar transaction
involving  ILCO or any of its  subsidiaries,  or any  proposal to acquire in any
manner a substantial equity interest in, or an substantial portion of the assets
of, ILCO or any of its subsidiaries.

     (d) The term "Superior  Proposal"  means any bona fide proposal to acquire,
directly  or  indirectly  (by way of tender  offer,  share  purchase,  merger or
otherwise),  all of the  outstanding  shares of capital stock of ILCO (including
options and other  derivative  securities  exercisable  for or convertible  into
capital stock of ILCO) for consideration  consisting of cash and/or  securities,
on terms which the Board of  Directors  of ILCO  determines  in good faith to be
more favorable to ILCO and its  shareholders  than the Merger (based upon advice
of the  financial  advisor of the Board of  Directors  of ILCO or any  committee
thereof that the value of the  consideration  provided  for in such  proposal is
superior to the value of the Merger Consideration),  for which financing, to the
extent  required,  is then  committed  or which,  in the good  faith  reasonable
judgment of the Board of  Directors  of ILCO,  after  receiving  advice from its
financial advisor, is reasonably capable of being financed by such third party.

                                      -36-
5.6 Consents, Approvals and Filings. FIC and ILCO will make and cause their
respective subsidiaries and, to the extent necessary,  their other affiliates to
make all necessary filings, including,  without limitation, those required under
the HSR  Act,  applicable  state  insurance  laws,  the  Securities  Act and the
Exchange Act in order to facilitate  the prompt  consummation  of the Merger and
the other transactions contemplated by this Agreement. In addition, FIC and ILCO
will  each  use  their  respective  commercially  reasonable  efforts,  and will
cooperate fully and in good faith with each other,  (a) to comply as promptly as
practicable with all governmental  requirements applicable to the Merger and the
other transactions contemplated by this Agreement, and (b) to obtain as promptly
as practicable all necessary  permits,  orders or other consents of Governmental
Entities and consents of all third parties necessary for the consummation of the
Merger and the other  transactions  contemplated by this Agreement.  Each of FIC
and ILCO shall use their respective  commercially reasonable efforts to promptly
provide such  information and  communications  to Governmental  Entities as such
Governmental  Entities may reasonably request.  Each of the parties hereto shall
provide to the other parties copies of all  applications in advance of filing or
submission of such applications to Governmental Entities in connection with this
Agreement and shall make such revisions thereto as reasonably  requested by each
other  party  hereto.  Each of the  parties  hereto  shall  provide to the other
parties  the   opportunity   to   participate   in  all  meetings  and  material
conversations   with   Governmental   Entities   with  respect  to  the  matters
contemplated  by this  Agreement.

     5.7 Affiliate Letters. Prior to the Closing Date, ILCO shall deliver to FIC
a letter  identifying  all persons who, at the time the Merger is submitted  for
approval to the  shareholders,  may be deemed to be an "affiliate" of such party
for  purposes  of  Rule  145  under  the  Securities  Act.  ILCO  shall  use its
commercially  reasonable  efforts to cause each such person to deliver to FIC on
or prior to the  Closing  Date a  written  agreement  substantially  in the form
attached as Exhibit A hereto.

     5.8 Nasdaq Listing.  FIC shall use its commercially  reasonable  efforts to
cause the  shares of FIC  Common  Stock to be issued in the  Merger and upon the
exercise of the  Assumed  Stock  Options  (as  defined in Section  6.3(a)) to be
approved for quotation in the Nasdaq Stock Market's Small Cap Market.

     5.9 INDEMNIFICATION OF OFFICERS AND DIRECTORS.

     (a) The Articles of Incorporation  and Bylaws of the Surviving  Corporation
shall  contain  the  provisions  with  respect  to  indemnification  at least as
favorable  as those  contained in the  Articles of  Incorporation  and Bylaws of
ILCO,  as in effect on the date  hereof,  and none of such  provisions  shall be
amended,  repealed  or  otherwise  modified  for a period of six years after the
Effective Time in any manner that would adversely  affect the rights  thereunder
of  individuals  who at any time prior to the Effective  Time were  directors or
officers of ILCO or any of its respective  subsidiaries in respect of actions or
omissions  occurring  at or  prior to the  Effective  Time  (including,  without
limitation,  the  transactions  contemplated  by this  Agreement),  unless  such
modification is required by law.

                                      -37-
(b)  To  the  extent,  if  any,  not  provided  by  an  existing  right  of
indemnification  or other agreement or policy (and in addition to the agreements
set forth in Section 5.9(a) above),  from and after the Effective  Time, FIC and
the Surviving  Corporation,  jointly and severely  shall,  to the fullest extent
permitted by applicable law, indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date hereof,  or who becomes  prior
to the date hereof,  or who becomes prior to the Effective  Time, (i) an officer
or director of ILCO or any of its subsidiaries  (including  without  limitation,
members of the ILCO  Special  Committee),  (ii) an officer or director of Merger
Sub or (iii) an  officer  or  director  of FIC,  including  without  limitation,
members of the FIC Special Committee,  (and each such person's heirs,  executors
and   administrators)   (each  an  "Indemnified   Party"  and  collectively  the
"Indemnified  Parties")  against  all  losses,  expenses  (including  reasonable
attorney's fees and expenses), claims, damages or liabilities or, subject to the
written  consent  of  FIC or  the  Surviving  Corporation  (which  shall  not be
unreasonably withheld), amounts paid in settlement, including the advancement of
expenses  relating  thereto,  arising out of  threatened,  pending or  completed
actions, suits or other proceedings, whether civil, criminal,  administrative or
investigative  or other  type  whatsoever,  occurring  prior to, at or after the
Effective  Time that are,  in whole or in part,  based on or arising  out of the
fact that such person is or was a director or officer of such party.

     (c) The  provisions  of this Section 5.9 are intended to be for the benefit
of, and shall be  enforceable  by,  each  Indemnified  Party,  his heirs and his
personal  representatives  and shall be binding on all successors and assigns of
FIC, the Surviving Corporation and ILCO.

     5.10 Letter of FIC's Accountants. FIC shall use its commercially reasonable
efforts to cause to be delivered to ILCO a letter of PricewaterhouseCoopers LLP,
FIC's  independent  public   accountants,   and  any  other  independent  public
accountants  whose  report  would be  required  to be  included  in the Form S-4
pursuant to the rules and  regulations  under the  Securities  Act, each dated a
date within two business days before the date on which the Form S-4 shall become
effective  and an  additional  letter  from each of them dated a date within two
business days before the Closing Date, each addressed to such party, in form and
substance  reasonably  satisfactory to ILCO and customary in scope and substance
for letters  delivered by  independent  public  accountants  in connection  with
registration statements similar to the Form S-4.

     5.11  Letter  of  ILCO's  Accountants.  ILCO  shall  use  its  commercially
reasonable   efforts   to  cause   to  be   delivered   to  FIC  a   letter   of
PricewaterhouseCoopers LLP, ILCO's independent public accountants, and any other
independent  public accountants whose report would be required to be included in
the Form S-4 pursuant to the rules and  regulations  under the  Securities  Act,
each dated a date within two business days before the date on which the Form S-4
shall become  effective and an additional  letter from each of them dated a date
within two business days before the Closing Date,  each addressed to such party,
in form and substance reasonably  satisfactory to FIC and customary in scope and
substance for letters delivered by independent  public accountants in connection
with registration statements similar to the Form S- 4.

                                      -38-
5.12 FIC Stock Option Held by Investors-NA.  ILCO covenants and agrees that
it will use its best  efforts to cause  Investors-NA  to enter into an agreement
with FIC whereby the terms and provisions of the agreement, dated March 21, 1991
(which  agreement grants to Investors-NA an option to purchase up to 9.9% of the
outstanding shares of FIC Common Stock) (the "Investors-NA  Option  Agreement"),
are modified so as to provide  Investors-NA  an option to purchase up to 500,411
shares of FIC Common Stock (such amount being 9.9% of the outstanding  shares of
FIC  Common  Stock  as of the  date of this  Agreement).  The  amendment  to the
Investors-NA  Option Agreement described in this Section 5.12 shall be effective
as of the Effective Time.

     5.13 Vote of Shares of ILCO Common Stock by FIC. FIC  covenants  and agrees
that,  at the  ILCO  Shareholders  Meeting,  FIC  shall,  and  shall  cause  its
subsidiaries  to, vote all shares of ILCO Common  Stock held of record by FIC or
its subsidiaries  either "for" or "against" the Merger in the same manner as the
prevailing  majority of the shares of ILCO Common  Stock (other than shares held
of record by FIC or any of its  subsidiaries)  voted (in person or by proxy) (it
being  understood  that,  for  purposes  of  this  Section  5.13,  FIC  and  its
subsidiaries will vote 100% of the shares held by them collectively either "for"
or "against"  the Merger,  and  abstentions  and broker  non-votes  shall not be
counted for purposes of  determining  the  prevailing  majority of the shares of
ILCO Common Stock voting on the Merger).

                        ARTICLE VI COVENANTS RELATING TO
                       CONDUCT OF BUSINESS PRIOR TO MERGER

     6.1 Conduct of Business of ILCO.  Except as expressly  contemplated by this
Agreement,  during the period from the date of this  Agreement to the  Effective
Time, ILCO shall,  and shall cause its  subsidiaries  to, act and carry on their
respective  businesses  in the  ordinary  course of business  and, to the extent
consistent  therewith,  use commercially  reasonable  efforts to preserve intact
their  current  business  organizations,  keep  available  the services of their
current  officers and  employees  and preserve the goodwill of those  engaged in
material business  relationships  with them.  Without limiting the generality of
the  foregoing,  during  the  period  from  the  date of this  Agreement  to the
Effective Time and except as set forth in the ILCO SEC Documents or as set forth
in the ILCO Disclosure  Letter,  ILCO shall not, and shall not permit any of its
subsidiaries to, without the prior consent of FIC:

     (a) (i)  declare,  set  aside or pay any  dividends  on,  or make any other
distributions  (whether in cash, stock or property) in respect of, any of its or
its subsidiaries'  outstanding capital stock (except dividends and distributions
by a direct or indirect  wholly owned  subsidiary  of ILCO to its parent),  (ii)
split,  combine or reclassify any of its  outstanding  capital stock or issue or
authorize  the issuance of any other  securities in respect of, in lieu of or in
substitution  for  shares of its  outstanding  capital  stock,  (iii)  except in
connection  with the  termination of the employment of any employees,  purchase,
redeem or  otherwise  acquire  any shares of  outstanding  capital  stock or any
rights,  warrants or options to acquire any such  shares,  or (iv) issue,  sell,
grant,  pledge or otherwise  encumber any shares of its capital stock, any other
equity securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, equity securities or convertible securities
(other than (A) upon the exercise of ILCO Stock Options  outstanding on the date
of this  Agreement or issued under clause (C) below,  (B) pursuant to employment
agreements  or other  contractual  arrangements  in  effect  on the date of this
Agreement  and (C)  issuances  of stock of any direct or indirect  wholly  owned
Subsidiary of ILCO to its parent);

                                      -39-
(b) amend its Articles of Incorporation, Bylaws or other comparable charter
or organizational documents;

     (c) acquire any business (including the assets thereof) or any corporation,
partnership,  joint  venture,  association  or other  business  organization  or
division thereof;

     (d) sell, mortgage or otherwise encumber or subject to any Lien (other than
mechanics  liens filed in connection  with the  development  of real property by
Investors NA) or otherwise  dispose of any of its  properties or assets that are
material to ILCO and its subsidiaries, taken as whole;

     (e) (i) other than working  capital  borrowings  in the ordinary  course of
business and consistent with past practices, incur any indebtedness for borrowed
money  or  guarantee  any  such  indebtedness  of  another  person,  other  than
indebtedness  owing to or guarantees of indebtedness owing to ILCO or any of its
direct or indirect wholly-owned  subsidiaries or (ii) make any material loans or
advances  to any  other  person,  other  than to ILCO  or any of its  direct  or
indirect wholly-owned  subsidiaries and other than routine advances to employees
consistent with past practices;

     (f) make any Tax election or settle or compromise  any Tax  liability  that
could reasonably be expected to be material to ILCO and its subsidiaries,  taken
as a whole,  or change its Tax or  accounting  methods,  policies,  practice  or
procedures, except as required by law or GAAP;

     (g) pay, discharge,  settle or satisfy any material claims,  liabilities or
obligations   (absolute,   accrued,   asserted  or  unasserted,   contingent  or
otherwise),  other than the payment, discharge or satisfaction,  in the ordinary
course of business  consistent  with past practice or in  accordance  with their
terms, of liabilities  reflected or reserved against in, or contemplated by, the
most recent  consolidated  financial  statements  (or the notes thereto) of ILCO
included in the ILCO SEC Documents or incurred  since the date of such financial
statements in the ordinary course of business consistent with past practice;

     (h) make any material commitments or agreements for capital expenditures or
capital additions or betterments except as materially consistent with the budget
for  capital  expenditures  as of the date of this  Agreement,  in the  ordinary
course of business consistent with past practices;

     i) except as may be required by law:

          (A) other than in the ordinary  course of business and consistent with
     past practices, make any representation or promise, oral or written, to any
     employee  or former  director,  officer or  employee  of ILCO or any of its
     subsidiaries which is inconsistent with the terms of any ILCO Benefit Plan;

          (B) other than in the ordinary course of business, make any change to,
     or amend in any way, the contracts,  salaries, wages, or other compensation
     of any director,  employee or any agent or consultant of ILCO or any of its
     subsidiaries  other than routine  changes or  amendments  that are required
     under existing contracts;

                                      -40-
(C) except for renewals in the ordinary course of business  consistent
     with  past  practices,  adopt,  enter  into,  amend,  alter  or  terminate,
     partially or  completely,  any ILCO  Benefit  Plan,  or any  election  made
     pursuant to the  provisions of any ILCO Benefit  Plan,  to  accelerate  any
     payments, obligations or vesting schedules under any ILCO Benefit Plan; or

          (D) other than in the ordinary course of business consistent with past
     practices, approve any general or company-wide pay increases for employees;

     (j) except in the ordinary course of business,  modify,  amend or terminate
any  material  agreement,  permit,  concession,  franchise,  license  or similar
instrument to which ILCO or any of its subsidiaries is a party or waive, release
or assign any material rights or claims thereunder; or

     (k)  authorize  any of, or commit  or agree to take any of,  the  foregoing
actions.

     6.2 Conduct of Business of FIC.  Except as expressly  contemplated  by this
Agreement,  during the period from the date of this  Agreement to the  Effective
Time,  FIC shall,  and shall cause its  subsidiaries  to, act and carry on their
respective  businesses  in the  ordinary  course of business  and, to the extent
consistent  therewith,  use commercially  reasonable  efforts to preserve intact
their  current  business  organizations,  keep  available  the services of their
current  officers and  employees  and preserve the goodwill of those  engaged in
material business  relationships  with them.  Without limiting the generality of
the  foregoing,  during  the  period  from  the  date of this  Agreement  to the
Effective  Time and except as set forth in the FIC SEC Documents or as set forth
in the FIC  Disclosure  Letter,  FIC shall not,  and shall not permit any of its
subsidiaries  to, without the prior consent of ILCO:

     (a) (i)  declare,  set  aside or pay any  dividends  on,  or make any other
distributions  (whether in cash, stock or property) in respect of, any of its or
its subsidiaries'  outstanding capital stock (except dividends and distributions
by a direct or indirect  wholly owned  subsidiary  of FIC to its  parent),  (ii)
split,  combine or reclassify any of its  outstanding  capital stock or issue or
authorize  the issuance of any other  securities in respect of, in lieu of or in
substitution  for  shares of its  outstanding  capital  stock,  (iii)  except in
connection  with the  termination of the employment of any employees,  purchase,
redeem or  otherwise  acquire  any shares of  outstanding  capital  stock or any
rights,  warrants or options to acquire any such  shares,  or (iv) issue,  sell,
grant,  pledge or otherwise  encumber any shares of its capital stock, any other
equity securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, equity securities or convertible securities
(other than (A) upon the exercise of FIC Stock Options  outstanding  on the date
of this  Agreement or issued under clause (C) below,  (B) pursuant to employment
agreements  or other  contractual  arrangements  in  effect  on the date of this
Agreement  and (C)  issuances  of stock of any direct or indirect  wholly  owned
Subsidiary of FIC to its parent);

                                      -41-
(b)  amend  its  Articles  of  Incorporation,   Bylaws  or  other
          comparable  charter  or  organizational  documents;

               (c) acquire any business  (including  the assets  thereof) or any
          corporation, partnership, joint venture, association or other business
          organization  or division  thereof;

               (d) sell,  mortgage or otherwise  encumber or subject to any Lien
          or  otherwise  dispose  of any of its  properties  or assets  that are
          material to FIC and its subsidiaries, taken as whole;

               (e) (i) other than  working  capital  borrowings  in the ordinary
          course of  business  and  consistent  with past  practices,  incur any
          indebtedness for borrowed money or guarantee any such  indebtedness of
          another  person,  other than  indebtedness  owing to or  guarantees of
          indebtedness   owing  to  FIC  or  any  of  its  direct  or   indirect
          wholly-owned  subsidiaries or (ii) make any material loans or advances
          to any  other  person,  other  than  to FIC  or any of its  direct  or
          indirect wholly-owned  subsidiaries and other than routine advances to
          employees consistent with past practices;

               (f)  make  any Tax  election  or  settle  or  compromise  any Tax
          liability that could  reasonably be expected to be material to FIC and
          its  subsidiaries,  taken as a whole,  or change its Tax or accounting
          methods, policies,  practice or procedures,  except as required by law
          or GAAP;

               (g) pay,  discharge,  settle  or  satisfy  any  material  claims,
          liabilities or obligations (absolute, accrued, asserted or unasserted,
          contingent  or  otherwise),  other  than  the  payment,  discharge  or
          satisfaction,  in the ordinary course of business consistent with past
          practice or in accordance with their terms,  of liabilities  reflected
          or  reserved   against  in,  or  contemplated   by,  the  most  recent
          consolidated  financial  statements  (or  the  notes  thereto)  of FIC
          included in the FIC SEC  Documents or incurred  since the date of such
          financial  statements  in the ordinary  course of business  consistent
          with past practice;

               (h) make any  material  commitments  or  agreements  for  capital
          expenditures or capital additions or betterments  except as materially
          consistent with the budget for capital  expenditures as of the date of
          this  Agreement,  in the ordinary  course of business  consistent with
          past practices;

               (i) except as may be required by law:

                    (A)  other  than in the  ordinary  course  of  business  and
               consistent  with  past  practices,  make  any  representation  or
               promise,  oral or written,  to any  employee or former  director,
               officer or  employee of FIC or any of its  subsidiaries  which is
               inconsistent with the terms of any FIC Benefit Plan;

                    (B) other than in the ordinary course of business,  make any
               change to, or amend in any way, the contracts,  salaries,  wages,
               or other  compensation of any director,  employee or any agent or
               consultant of ILCO or any of its subsidiaries  other than routine
               changes or amendments that are required under existing contracts;

                                      -42-
(C) except for renewals in the  ordinary  course of business
               consistent with past practices,  adopt,  enter into, amend, alter
               or terminate,  partially or completely,  any FIC Benefit Plan, or
               any election made  pursuant to the  provisions of any FIC Benefit
               Plan,  to  accelerate   any  payments,   obligations  or  vesting
               schedules under any FIC Benefit Plan; or

                    (D) other than in the ordinary course of business consistent
               with past  practices,  approve  any general or  company-wide  pay
               increases for employees;

     (j) except in the ordinary course of business,  modify,  amend or terminate
any  material  agreement,  permit,  concession,  franchise,  license  or similar
instrument to which FIC or any of its subsidiaries is a party or waive,  release
or assign any material rights or claims thereunder; or

     (k)  authorize  any of, or commit  or agree to take any of,  the  foregoing
actions.

     6.3 Stock Options.  (a) At the Effective  Time, each ILCO Stock Option that
is outstanding and unexercised  immediately prior to the Effective Time shall be
deemed to have been assumed by FIC, without further action by FIC, the Surviving
Corporation or the holders of such options, and shall thereafter be deemed to be
an option  to  acquire  shares of FIC  Common  Stock in such  amount  and at the
exercise price provided below and otherwise having the same terms and conditions
as are in effect  immediately  prior to the Effective Time (except to the extent
that such terms and conditions may be altered in accordance  with their terms as
a result of the  transactions  contemplated  hereby)  (such ILCO  Stock  Options
assumed by FIC being the "Assumed Stock Options"):

          (i) the number of shares of FIC Common  Stock to be subject to the new
     option  shall be equal to the  product  of (x) the number of shares of ILCO
     Common  Stock  subject to the original  option and (y) the  Exchange  Ratio
     (rounded  to the nearest  1/100 of a share);

          (ii) the  exercise  price per share of FIC Common  Stock under the new
     option  shall be equal to (x) the  exercise  price per share of ILCO Common
     Stock under the original  option divided by (y) the Exchange Ratio (rounded
     to the nearest $0.01); and

          (iii) in accordance with the terms of the ILCO Stock Option Plan under
     which the ILCO Stock Options were issued,  fractional shares of any Assumed
     Stock  Options  resulting  from the  adjustments  set forth in this Section
     6.3(a) shall be eliminated.

     (b) At the  Effective  Time,  FIC shall  assume the ILCO Stock Option Plan,
with such changes thereto as may be necessary to reflect the consummation of the
transactions  contemplated  hereby.  Nothing  in this  Section  6.3(b)  shall be
construed  to prevent FIC in any way from  terminating  or freezing the benefits
under any such plans  (subject to the rights of the holders of the Assumed Stock
Options thereunder) and adopting one or more new stock option plans, as approved
by the Board of Directors of FIC following the Effective Time.

     (c) Promptly  following the Effective Time, FIC shall use its  commercially
reasonable efforts to file with the SEC a Registration Statement on Form S-8 (or
an  amendment  to any such  form of FIC  currently  on file with the SEC that is
available  therefor) (the "Form S- 8") for the purpose of registering the shares
of FIC Common Stock issuable upon the exercise of the Assumed Stock Options, and
FIC shall use its commercially  reasonable  efforts to have the Form S-8 (or any
post-effective amendment thereto) declared effective under the Securities Act as
soon as practicable after such filing.

                                      -43-
6.4 Other Actions.  Subject to Section 5.5(b),  neither FIC nor ILCO shall,
and neither of them shall permit any of their  respective  subsidiaries to, take
any action that would, or that could  reasonably be expected to, (a) prevent the
Merger from qualifying as a reorganization  within the meaning of Section 368(a)
of the Code or (b) otherwise  result in any of the  conditions of the Merger set
forth in Article VII not being satisfied.

                        ARTICLE VII CONDITIONS PRECEDENT

     7.1  Conditions  to Each  Party's  Obligation  to Effect  the  Merger.  The
respective  obligation  of each  party to effect  the  Merger is  subject to the
satisfaction  or  waiver  on or  prior  to the  Closing  Date  of the  following
conditions:

          (a)  Shareholder  Approval.  The ILCO  Shareholders  Approval  and FIC
     Shareholders Approval shall have been obtained.

          (b)  Governmental  and  Regulatory  Consents.  All required  consents,
     approvals,  permits and  authorizations  to the  consummation of the Merger
     shall be obtained from any  Governmental  Entity whose  consent,  approval,
     permission or  authorization is required by reason of a change in law after
     the date of this  Agreement,  unless the  failure to obtain  such  consent,
     approval,  permission or authorization  could not reasonably be expected to
     have an ILCO Material Adverse Effect, or to materially and adversely affect
     the validity or  enforceability  of this  Agreement or the Merger.

          (c) HSR Act. The waiting period (and any extension thereof) applicable
     to the Merger  under the HSR Act shall have been  terminated  or shall have
     otherwise expired.

          (d) No  Injunctions  or Restraints.  No temporary  restraining  order,
     preliminary  or permanent  injunction or other order issued by any court of
     competent  jurisdiction or other legal restraint or prohibition  preventing
     the consummation of the Merger shall be in effect; provided,  however, that
     the party invoking this  condition  shall use its  commercially  reasonable
     efforts to have any such order or injunction vacated.

          (e) Nasdaq Listing.  The shares of FIC Common Stock issuable  pursuant
     to the Merger shall have been  approved  for  quotation in the Nasdaq Stock
     Market's Small Cap Market.

          (f) Form  S-4.  The Form S-4 shall  have  become  effective  under the
     Securities  Act  and  shall  not  be  the  subject  of any  stop  order  or
     proceedings seeking a stop order.

                                      -44-
7.2 Conditions to Obligations of ILCO. The obligation of ILCO to effect the
Merger is further subject to the following conditions:

          (a) Representations and Warranties. The representations and warranties
     of FIC and Merger Sub contained in this Agreement  shall have been true and
     correct on the date of this  Agreement and shall be true and correct at and
     as of the Closing Date as though made at and as of such time (except to the
     extent that any such  representations and warranties  expressly relate only
     to an earlier  time, in which case they shall have been true and correct at
     such earlier time); provided,  however, that this condition shall be deemed
     to have been  satisfied  unless the  individual or aggregate  impact of all
     inaccuracies of such  representations and warranties (without regard to any
     materiality or FIC Material  Adverse Effect  qualifier(s)  contained in any
     individual representation or warranty) could reasonably be expected to have
     a material adverse effect on the condition  (financial or otherwise) of FIC
     and its subsidiaries,  considered as a whole, and except to the extent that
     any  inaccuracies  of such  representations  and warranties are a result of
     changes in the United States  financial  markets  generally or in national,
     regional or local economic conditions generally, or are a result of matters
     arising after the date hereof that affect the insurance industry generally.
     FIC and Merger Sub shall each have delivered to ILCO a certificate dated as
     of the Closing Date, signed by a senior executive officer of FIC and Merger
     Sub, to the effect set forth in this Section 7.2(a).

          (b)  Performance of Obligations of FIC and Merger Sub. Each of FIC and
     Merger Sub shall have  performed in all material  respects all  obligations
     required  to be  performed  by it under this  Agreement  at or prior to the
     Closing Date,  and ILCO shall have received a certificate  signed on behalf
     of each of FIC and Merger Sub by a senior executive officer to such effect.

          (c) Tax  Opinion.  ILCO shall have  received an opinion of Fulbright &
     Jaworski  L.L.P.,  dated as of the Closing Date, to the effect that (i) the
     Merger will constitute a  reorganization  under Section 368(a) of the Code,
     (ii) FIC,  Merger  Sub and ILCO will each be a party to the  reorganization
     under  Section  368(b)  of the  Code,  and  (iii)  no gain or loss  will be
     recognized by the shareholders of ILCO upon the receipt of FIC Common Stock
     in  exchange  for ILCO  Common  Stock  pursuant  to the Merger  except with
     respect to any cash  received in lieu of  Fractional  Shares.  In rendering
     such opinion,  Fulbright & Jaworski L.L.P.  shall receive and may rely upon
     representations,  contained in  certificates  of FIC,  Merger Sub and ILCO,
     that are standard for tax-free reorganizations similar to the Merger.

          (d) Fairness  Opinion.  The ILCO Fairness  Opinion shall not have been
     modified,  withdrawn  or  revoked as of the date and time of mailing of the
     Joint Proxy Statement/Prospectus to the shareholders of ILCO.

          (e)  Consent.  FIC shall have  obtained the consent or approval of any
     person required under any FIC Material Contract,  if any, to consummate the
     transactions contemplated by this Agreement.

          (f) No Material  Adverse  Change.  There shall not have  occurred  any
     change in the business of FIC and its  subsidiaries  since the date of this
     Agreement  or any other  event or  circumstance  that could  reasonably  be
     expected to have an FIC Material Adverse Effect.

                                      -45-
7.3 Conditions to Obligations of FIC. The obligations of FIC and Merger Sub
to effect the Merger are further subject to the following conditions:

          (a) Representations and Warranties. The representations and warranties
     of ILCO contained in this Agreement shall have been true and correct on the
     date of this  Agreement  and  shall  be true and  correct  at and as of the
     Closing  Date as though  made at and as of such time  (except to the extent
     that any such  representations  and warranties  expressly relate only to an
     earlier  time,  in which case they shall have been true and correct at such
     earlier time);  provided,  however,  that this condition shall be deemed to
     have been  satisfied  unless  the  individual  or  aggregate  impact of all
     inaccuracies of such  representations and warranties (without regard to any
     materiality or ILCO Material Adverse Effect  qualifier(s)  contained in any
     individual representation or warranty) could reasonably be expected to have
     a material adverse effect on the condition (financial or otherwise) of ILCO
     (or,  following the Effective  Time,  the  Surviving  Corporation)  and its
     subsidiaries,  considered  as a whole,  and except to the  extent  that any
     inaccuracies of such representations and warranties are a result of changes
     in the United States financial markets  generally or in national,  regional
     or local economic conditions generally,  or are a result of matters arising
     after the date hereof that affect the insurance  industry  generally.  ILCO
     shall have  delivered to FIC and Merger Sub a  certificate  dated as of the
     Closing Date,  signed by a senior executive  officer of ILCO, to the effect
     set forth in this Section 7.3(a).

          (b)  Performance of Obligations of ILCO.  ILCO shall have performed in
     all material respects all obligations  required to be performed by it under
     this  Agreement  at or prior to the  Closing  Date,  and FIC and Merger Sub
     shall  have  received  a  certificate  signed on behalf of ILCO by a senior
     executive officer of ILCO to such effect.

          (c) Tax Opinion. FIC shall have received an opinion of Weil, Gotshal &
     Manges LLP, dated as of the Closing Date, to the effect that (i) the Merger
     will  constitute a  reorganization  under Section 368(a) of the Code,  (ii)
     FIC, Merger Sub and ILCO will each be a party to the  reorganization  under
     Section 368(b) of the Code, and (iii) no gain or loss will be recognized by
     FIC, Merger Sub or ILCO by reason of the Merger. In rendering such opinion,
     Weil, Gotshal & Manges LLP shall receive and may rely upon representations,
     contained in  certificates  of FIC,  Merger Sub and ILCO, that are standard
     for tax-free reorganizations similar to the Merger.

          (d) Consents.  ILCO shall have obtained the consent or approval of any
     person  required  under any Material  Contract,  if any, to consummate  the
     transactions contemplated by this Agreement.

          (e) Fairness  Opinion.  The FIC Fairness  Opinion  shall not have been
     modified,  withdrawn  or  revoked as of the date and time of mailing of the
     Joint Proxy Statement/Prospectus to the shareholders of FIC.

          (f) Investors-NA Option Agreement. FIC shall have received an executed
     copy of the amendment to the Investors-NA Option Agreement, as described in
     Section 5.12, and such  agreement,  as amended,  shall be in full force and
     effect.

                                      -46-
(g) No Material  Adverse  Change.  There shall not have  occurred  any
     change in the business of ILCO and its subsidiaries  since the date of this
     Agreement  or any other  event or  circumstance  that could  reasonably  be
     expected to have an ILCO Material Adverse Effect.

                      ARTICLE VIII TERMINATION, AMENDMENT
                                   AND WAIVER

8.1  Termination.  This Agreement may be terminated and the
          Merger  abandoned as follows:

     (a) at any time  prior  to the  Effective  Time,  whether  before  or after
approval of this Agreement and the Merger by the shareholders of ILCO or FIC, by
mutual written consent of FIC and ILCO;

     (b) at any time  prior  to the  Effective  Time,  whether  before  or after
approval of this Agreement and the Merger by the shareholders of ILCO or FIC:

               (i) by FIC or ILCO if the ILCO  Shareholders  Approval  shall not
          have been obtained after  submission by the Board of Directors of ILCO
          of this Agreement and the Merger for approval by the  shareholders  of
          ILCO at a  special  meeting  called  for such  purpose  or by  written
          consent of such shareholders in accordance with Section 5.2(a);

               (ii) by FIC or ILCO if the FIC  Shareholders  Approval  shall not
          have been obtained  after  submission by the Board of Directors of FIC
          of the  issuance  of shares of FIC Common  Stock in the Merger and the
          Charter Amendment for approval by the common  shareholders of FIC at a
          special  meeting  called for such purpose in  accordance  with Section
          5.2(b);

               (iii)  by  FIC  or  ILCO  if  the  Merger  shall  not  have  been
          consummated  on  or  before  June  1,  2001,  unless  the  failure  to
          consummate  the Merger is the result of a willful and material  breach
          of this Agreement by the party seeking to terminate this Agreement;

               (iv) by FIC or ILCO if any Governmental  Entity shall have issued
          an order,  decree or  ruling  or taken  any other  action  permanently
          enjoining,  restraining or otherwise  prohibiting  the Merger and such
          order,  decree,  ruling or other  action  shall have become  final and
          nonappealable;

               (v) by FIC or ILCO in the event of a breach by the other party of
          any representation, warranty, covenant or other agreement contained in
          this Agreement which (A) would give rise to the failure of a condition
          set forth in  Section  7.2(a)  or (b) or  Section  7.3(a)  or (b),  as
          applicable,  and (B)  cannot be or has not been  cured  within 30 days
          after the  giving of  written  notice to the  breaching  party of such
          breach (a "Material  Breach"),  provided that the terminating party is
          not then in Material Breach of any representation,  warranty, covenant
          or other agreement contained in this Agreement;

                                      -47-
(vi) by FIC if ILCO  shall  have  breached  the  requirements  of
          Section  5.5  hereof,  unless  FIC shall at such  time be in  Material
          Breach of any  representation,  warranty,  covenant or other agreement
          contained in this Agreement; or

               (vii) by ILCO if a third  party  shall  have made an  Acquisition
          Proposal  that is a  Superior  Proposal  and the  Company  shall  have
          concurrently  executed a definitive agreement with such third party in
          respect of such Superior Proposal.

     8.2 Effect of  Termination.  (a) In the event  that FIC or ILCO  terminates
this Agreement as provided in Section 8.1(a), 8.1(b)(i), 8.1(b)(ii), 8.1(b)(iii)
or 8.1(b)(iv),  this Agreement shall  forthwith  become void and have no effect,
without any liability or  obligation on the part of FIC or ILCO,  other than the
last sentence of Section 5.3 and Sections 2.9,  3.8,  5.9, 8.2,  10.1,  11.2 and
11.8.

          (b) In the event that this  Agreement is terminated by FIC pursuant to
     Section 8.1 (b)(vi) or by ILCO pursuant to Section 8.1(b)(vii),  ILCO shall
     promptly  reimburse  FIC  for all  substantiated  out-of-pocket  costs  and
     expenses  incurred  by them  in  connection  with  this  Agreement  and the
     transactions contemplated hereby, including,  without limitation, costs and
     expenses of accountants,  attorneys and financial advisors.  This Agreement
     shall  not be deemed to have been  validly  terminated  until all  payments
     contemplated by this Section 8.2(b) shall have been made in full.

          (c) In the event that this  Agreement is  terminated  by either FIC or
     ILCO  pursuant  to  Section  8.1(b)(v),  the  non-breaching  party may seek
     damages or any other appropriate remedy in law or in equity.

     8.3 Amendment.  Subject to the applicable  provisions of the Texas Code, at
any time prior to the  Effective  Time,  the parties  hereto may modify or amend
this Agreement,  by written agreement  executed and delivered by duly authorized
officers  of the  respective  parties;  provided,  however,  that after the ILCO
Shareholders  Approval  has been  obtained,  no  amendment  shall be made  which
reduces the consideration  payable in the Merger or adversely affects the rights
of ILCO's shareholders hereunder without the approval of such shareholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties.

     8.4 Extension;  Consent;  Waiver.  At any time prior to the Effective Time,
the  parties  may  (a)  extend  the  time  for  the  performance  of  any of the
obligations or other acts of the other parties,  (b) waive any  inaccuracies  in
the  representations  and  warranties  of the other  parties  contained  in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to Section 8.3, waive compliance with any of the agreements or conditions of the
other  parties  contained in this  Agreement or consent to any action  requiring
consent pursuant to this Agreement.  Any agreement on the part of a party to any
such  extension,  waiver  or  consent  shall  be valid  only if set  forth in an
instrument in writing  signed on behalf of such party.  The failure of any party
to this  Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.

                                      -48-
8.5 Procedure for Termination,  Amendment,  Extension, Consent or Waiver. A
termination  of this  Agreement  pursuant to Section  8.1, an  amendment of this
Agreement pursuant to Section 8.3 or an extension, consent or waiver pursuant to
Section 8.4 shall, in order to be effective, require in the case of FIC or ILCO,
action by its Board of Directors or a duly authorized  committee of its Board of
Directors.

                       ARTICLE IX SURVIVAL OF PROVISIONS

     9.1 Survival.  The  representations  and warranties of FIC,  Merger Sub and
ILCO made in this Agreement, or in any certificate,  respectively,  delivered by
any of them pursuant to this Agreement, will not survive the Closing.
ARTICLE X NOTICES

     10.1 Notices.  All notices and other  communications  under this  Agreement
must be in  writing  and will be deemed to have  been duly  given if  delivered,
telecopied or mailed, by certified mail, return receipt  requested,  first-class
postage prepaid, to the parties at the following addresses:

     If to FIC or Merger Sub, to:

                Financial  Industries  Corporation
                6500 River Place Blvd., Building One
                Austin,  Texas 78730
                Attention:  James M. Grace
                Facsimile:  (512) 404-5051

        with  copies to:

                Weil,  Gotshal & Manges  LLP
                100  Crescent Court,  Suite  1300
                Dallas,  Texas  75201
                Attention:  Glenn D.  West
                Facsimile:  (214)  746-7777

        If to  ILCO,  to:

                InterContinental  Life  Corporation
                6500 River Place Blvd.,  Building One
                Austin,  Texas 78730
                Attention:  Theodore A. Fleron
                Facsimile:  (512) 404-5051

                                      -49-
with a copy to:

                Fulbright & Jaworski,  L.L.P.
                600  Congress  Avenue,  Suite 2400
                Austin,  Texas 78701
                Attention:  Walter Earl Bissex
                Facsimile:  (512) 536-4598

All notices and other communications  required or permitted under this Agreement
that are addressed as provided in this Article X will, if delivered  personally,
be deemed  given upon  delivery,  will,  if  delivered  by  telecopy,  be deemed
delivered when confirmed and will, if delivered by mail in the manner  described
above,  be deemed given on the third  business day after the day it is deposited
in a regular  depository of the United States mail.  Any party from time to time
may  change  its  address  for the  purpose of notices to that party by giving a
similar  notice  specifying a new address,  but no such notice will be deemed to
have been given until it is actually  received by the party sought to be charged
with the contents thereof.

                                   ARTICLE XI
                                  MISCELLANEOUS

     11.1 Entire Agreement. Except for the documents executed by FIC, Merger Sub
and ILCO pursuant hereto,  this Agreement  supersedes all prior  discussions and
agreements  between  the  parties  with  respect to the  subject  matter of this
Agreement, and this Agreement (including the exhibits hereto and other documents
delivered in connection herewith) contains the sole and entire agreement between
the parties hereto with respect to the subject matter hereof.

     11.2 Expenses. Except as provided in Section 8.2, whether or not the Merger
is  consummated,  each of FIC,  Merger  Sub and ILCO  will pay its own costs and
expenses  incident  to  preparing  for,  entering  into  and  carrying  out this
Agreement and the consummation of the transactions  contemplated  hereby. In the
event of any lawsuit or other  judicial  proceeding  brought by either  party to
enforce  any of the  provisions  of this  Agreement,  the  losing  party in such
proceeding shall reimburse the prevailing  party's fees and expenses incurred in
connection therewith, including the fees and expenses of its attorneys.

     11.3  Counterparts.   This  Agreement  may  be  executed  in  two  or  more
counterparts,  each of which will be deemed an  original,  but all of which will
constitute one and the same  instrument  and shall become  effective when one or
more  counterparts  have been signed by each of the parties and delivered to the
other parties.

     11.4 No Third  Party  Beneficiary.  Except for Section  5.9,  the terms and
provisions of this Agreement are intended  solely for the benefit of the parties
hereto, and their respective  successors or assigns, and it is not the intention
of the parties to confer third-party beneficiary rights upon any other person.

     11.5 Governing  Law. This  Agreement  shall be governed by and construed in
accordance  with the laws of the  State of  Texas,  regardless  of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.

                                      -50-
11.6  Assignment;  Binding  Effect.  Neither this  Agreement nor any of the
rights,  interests or  obligations  under this Agreement  shall be assigned,  in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties,  and any such assignment that is
not consented to shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon,  inure to the benefit of and be enforceable  by,
the parties and their respective successors and assigns.

     11.7 Headings,  Gender,  Etc. The headings used in this Agreement have been
inserted  for  convenience  and do not  constitute  matter  to be  construed  or
interpreted  in  connection  with this  Agreement.  Unless  the  context of this
Agreement otherwise requires, (a) words of any gender are deemed to include each
other  gender;  (b) words using the  singular or plural  number also include the
plural or  singular  number,  respectively;  (c) the terms  "hereof,"  "herein,"
"hereby,"  "hereto,"  and  derivative  or  similar  words  refer to this  entire
Agreement;  (d) the terms "Article" or "Section" refer to the specified  Article
or Section of this  Agreement;  (e) all  references to "dollars" or "$" refer to
currency of the United States of America;  (f) the term  "person"  shall include
any natural person, corporation, limited liability company, general partnership,
limited  partnership,  or  other  entity,  enterprise,   authority  or  business
organization; and (g) the term "or" is not exclusive.

     11.8 Invalid  Provisions.  If any provision of this Agreement is held to be
illegal,  invalid,  or unenforceable under any present or future law, and if the
rights or obligations  of ILCO,  Merger Sub or FIC under this Agreement will not
be materially and adversely  affected thereby,  (a) such provision will be fully
severable; (b) this Agreement will be construed and enforced as if such illegal,
invalid,  or unenforceable  provision had never comprised a part hereof; and (c)
the remaining  provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal,  invalid, or unenforceable provision or
by its severance herefrom.

     11.9 No  Recourse  Against  Others.  No past,  present or future  director,
officer, employee, shareholder, incorporator or partner, as such, of FIC, Merger
Sub,  ILCO  or the  Surviving  Corporation  shall  have  any  liability  for any
obligations  of FIC,  Merger Sub, ILCO or the Surviving  Corporation  under this
Agreement  or for any  claim  based  on,  in  respect  of or by  reason  of such
obligations or their creation.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                      -51-
IN WITNESS WHEREOF,  this Agreement has been duly executed and delivered by
the duly  authorized  officers of FIC,  Merger Sub and ILCO  effective as of the
date first written above.

FINANCIAL INDUSTRIES CORPORATION

By:    /s/ Roy F. Mitte
Name: Roy F. Mitte
Title:  Chairman, President and
Chief Executive Officer

ILCO ACQUISITION COMPANY
By:    /s/ Roy F. Mitte
Name: Roy F. Mitte
Title:   President

INTERCONTINENTAL LIFE CORPORATION

By:    /s/ Roy F. Mitte
Name: Roy F. Mitte
Title:  Chairman, President and Chief Executive Officer

                                      -52-
Annex I

                             ARTICLES OF AMENDMENT
                                       TO
                           ARTICLES OF INCORPORATION
                                       OF
                        FINANCIAL INDUSTRIES CORPORATION

        The undersigned, Mr. Roy F. Mitte and Mr. James M. Grace, certify that:

          1. They are the President and  Secretary,  respectively,  of Financial
     Industries Corporation (the "Corporation").

          2. At a duly held  Special  Meeting of the Board of  Directors  of the
     Corporation,  held on _______,  2001,  the Board of  Directors  adopted the
     following  resolution  approving the following amendment to the Articles of
     Incorporation of the Corporation:

          Paragraph 1 of Article IV is amended to read as follows:

               "The aggregate number of shares which the Corporation  shall have
          the authority to issue is twenty-five  million  (25,000,000) shares of
          common stock,  par value $0.20 per share."

          3. The  shareholders of the Corporation  adopted and approved the same
     amendment  by  resolution  at a special  meeting held at the offices of the
     Corporation in Austin,  Texas,  on ________,  2001, by the required vote of
     shareholders as prescribed by Article VII of the Corporation's  Articles of
     Incorporation and Articles 4.02 and 2.28 of the Texas Business  Corporation
     Act.

          4. The number of shares outstanding is _________. The number of shares
     entitled to vote on or consent to the amendment is __________.

          5. The number of shares voted in favor of the  amendment  was _______,
     or _____%,  which  exceeded the required  vote,  which is a majority  under
     Article VII of the Corporation's  Articles of Incorporation.  The number of
     shares voted against was _____.

          6. The  undersigned  have  executed  these  Articles of Amendment  and
     affixed the corporate seal on ________, 2001.

      __________________________                      ________________________
      Roy F. Mitte, President                         James M. Grace, Secretary

                                      -53-
Exhibit A

                                _________, 2001

Financial Industries Corporation
6500 River Place Blvd., Building One
Austin, Texas  78730

Ladies and Gentlemen:

     Reference is made to the  provisions  of the  Agreement and Plan of Merger,
dated as of January ___, 2001 (together with any amendments thereto, the "Merger
Agreement"),  among InterContinental Life Corporation,  a Texas corporation (the
"Company"),  Financial Industries  Corporation,  a Texas corporation ("Parent"),
and ILCO Acquisition  Company, a Texas corporation and a wholly owned subsidiary
of Parent ("Merger  Sub"),  pursuant to which Merger Sub will be merged with and
into the Company,  with the Company continuing as the surviving corporation (the
"Merger").   This  letter   constitutes  the  undertakings  of  the  undersigned
contemplated by the Merger Agreement, and is being furnished pursuant to Section
5.7 thereto.

     I understand  that I may be deemed to be an "affiliate" of the Company,  as
such term is defined for purposes of  paragraphs  (c) and (d) of Rule 145 ("Rule
145")  promulgated under the Securities Act of 1933, as amended (the "Securities
Act").  Execution  of this letter  shall not be  construed  as an  admission  of
"affiliate"  status nor as a waiver of any  rights  that I may have to object to
any claim that I am an "affiliate" on or after the date of this letter.

     If in  fact I were  to be  deemed  an  "affiliate"  of  the  Company  under
paragraphs  (c) and (d) of Rule 145, my ability to sell,  transfer or  otherwise
dispose of any shares of the common stock,  par value $0.20 per share, of Parent
(the "Parent  Shares")  received by me in exchange for any shares of ILCO Common
Stock (as  defined in the Merger  Agreement)  pursuant to the Merger or received
upon the exercise of any stock options may be restricted.

     I hereby  represent,  warrant and  covenant to Parent that I will not sell,
pledge,  transfer,  or otherwise  dispose of any of the Parent Shares except (i)
pursuant to an effective  registration  statement  under the Securities  Act, or
(ii) as permitted by, and in  accordance  with,  Rule 145 or another  applicable
exemption  under the  Securities Act and the rules and  regulations  promulgated
thereunder.

     I hereby  acknowledge  that,  except as  otherwise  provided  in the Merger
Agreement, Parent is under no obligation to register the sale, transfer, pledge,
or other  disposition of the Parent Shares or to take any other action necessary
for the purpose of making an exemption from registration available.

                                      -54-
I  understand  that Parent  will issue stop  transfer  instructions  to its
transfer agents with respect to the Parent Shares and that a restrictive  legend
will be placed on  certificates  delivered to me evidencing the Parent Shares in
substantially the following form:

          This  certificate and the shares  represented  hereby have been issued
          pursuant  to  a   transaction   governed  by  Rule  145  ("Rule  145")
          promulgated  under  the  Securities  Act  of  1933,  as  amended  (the
          "Securities Act"), and may not be sold or otherwise disposed of unless
          registered  under  the  Securities  Act  pursuant  to  a  Registration
          Statement  in  effect  at the  time or  unless  the  proposed  sale or
          disposition  can be  made  in  compliance  with  Rule  145 or  without
          registration in reliance on another exemption therefrom.

     The term Parent  Shares as used in this  letter  shall mean and include not
only the common  stock of Parent as  presently  constituted,  but also any other
stock which may be issued in exchange for, in lieu of, or in addition to, all or
any part of such Parent Shares.

     I agree that, from time to time, at Parent's reasonable request and without
further consideration, I shall execute and deliver such additional documents and
shall use my reasonable  best efforts to take all such further  lawful action as
may be reasonably  necessary or desirable to consummate and make  effective,  in
the most expeditious manner  practicable,  the transactions  contemplated by the
Merger Agreement.

                                        Very truly yours,

                                        Name:

                                      -55-
AGREEMENT AND PLAN OF MERGER
                                     AMONG
                       FINANCIAL INDUSTRIES CORPORATION,
                            ILCO ACQUISITION COMPANY
                                      AND
                       INTERCONTINENTAL LIFE CORPORATION

                          Dated as of January 17, 2001

Article I       THE MERGER....................................................2
1.1     The Merger............................................................2
1.2     Closing...............................................................2
1.3     Effective Time........................................................2
1.4     Articles of Incorporation.............................................2
1.5     Bylaws................................................................3
1.6     Directors.............................................................3
1.7     Officers..............................................................3
1.8     Effect on ILCO Capital Stock..........................................3
        (a)     Outstanding ILCO Common Stock.................................3
        (b)     Treasury Shares; FIC-Owned Shares.............................3
        (c)     Impact of Stock Splits, etc...................................4
1.9     Effect on FIC Capital Stock...........................................4
1.10    Effect on Merger Sub Capital Stock....................................4
1.11    Exchange of Certificates..............................................4
        (a)     Paying Agent..................................................4
        (b)     Exchange Procedures...........................................4
        (c)     Letter of Transmittal.........................................5
        (d)     Distributions with Respect to Unexchanged Shares..............5
        (e)     No Further Ownership Rights in ILCO Common Stock..............5
        (f)     No Fractional Shares..........................................6
        (g)     Termination of Payment Fund...................................6
        (h)     No Liability..................................................6
        (i)     Withholding of Tax............................................7
Article II      REPRESENTATIONS AND WARRANTIES OF ILCO........................7
2.1     Organization, Standing and Corporate Power............................7
2.2     Capital Structure.....................................................7
2.3     Authority; Noncontravention...........................................8
2.4     ILCO SEC Documents; Financial Statements..............................9
2.5     Absence of Certain Changes or Events.................................10
2.6     No Extraordinary Payments or Change in Benefits......................11

                                      -56-
2.7     Voting Requirements..................................................11
2.8     State Takeover Statutes..............................................11
2.9     Brokers..............................................................11
2.10    Compliance with Applicable Laws......................................11
2.11    Absence of Undisclosed Liabilities...................................11
2.12    Litigation...........................................................12
2.13    Transactions with Affiliates.........................................12
2.14    Labor Matters........................................................12
2.15    Employee Arrangements and Benefit Plans..............................12
2.16    Tax Matters..........................................................13
2.17    Intellectual Property................................................15
2.18    Environmental Matters................................................16
2.19    Material Contracts...................................................17
2.20    Tangible Property....................................................17
2.21    Fairness Opinion.....................................................17
2.22    Insurance Business...................................................18
2.23    Liabilities and Reserves.............................................19
2.24    ILCO Broker/Dealers..................................................19
Article III     REPRESENTATIONS AND WARRANTIES OF FIC........................20
3.1     Organization, Standing and Corporate Power...........................20
3.2     Capital Structure....................................................20
3.3     Authority; Noncontravention..........................................21
3.4     FIC SEC Documents....................................................22
3.5     Absence of Certain Changes or Events.................................23
3.6     No Extraordinary Payments or Change in Benefits......................23
3.7     Voting Requirements..................................................24
3.8     Brokers..............................................................24
3.9     Fairness Opinion.....................................................24
3.10    Compliance with Applicable Laws......................................24
3.11    Absence of Undisclosed Liabilities...................................24
3.12    Litigation...........................................................25

                                      -57-
3.13    Transactions with Affiliates.........................................25
3.14    FIC Common Stock.....................................................25
3.15    Employee Arrangements and Benefit Plans..............................25
3.16    Tax Matters..........................................................25
3.17    Intellectual Property................................................26
3.18    Environmental Matters................................................28
3.19    State Takeover Statutes..............................................28
3.20    Labor Matters........................................................29
3.21    Material Contracts...................................................29
3.22    Tangible Property....................................................29
3.23    Insurance Business...................................................29
3.24    Liabilities and Reserves.............................................30
Article IV      REPRESENTATIONS AND WARRANTIES OF MERGER SUB.................31
4.1     Organization, Standing and Corporate Power...........................31
4.2     Capital Structure....................................................31
4.3     Authority; Noncontravention..........................................31
4.4     No Prior Activities..................................................32
Article V       ADDITIONAL AGREEMENTS........................................32
5.1     Preparation of Form S-4 and Joint Proxy Statement/Prospectus;
        Information Supplied.................................................32
5.2     Shareholder Approval.................................................33
5.3     Access to Information; Confidentiality...............................34
5.4     Public Announcements.................................................35
5.5     Acquisition Proposals................................................35
5.6     Consents, Approvals and Filings......................................37
5.7     Affiliate Letters....................................................37
5.8     Nasdaq Listing.......................................................37
5.9     INDEMNIFICATION OF OFFICERS AND DIRECTORS............................37
5.10    Letter of FIC's Accountants..........................................38
5.11    Letter of ILCO's Accountants.........................................38
5.12    FIC Stock Option Held by Investors-NA................................39

                                      -58-
5.13    Vote of Shares of ILCO Common Stock by FIC...........................39
Article VI      COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR
        TO MERGER............................................................39
6.1     Conduct of Business of ILCO..........................................39
6.2     Conduct of Business of FIC...........................................41
6.3     Stock Options........................................................43
6.4     Other Actions........................................................44
Article VII     CONDITIONS PRECEDENT.........................................44
7.1     Conditions to Each Party's Obligation to Effect the Merger...........44
        (a)     Shareholder Approval.........................................44
        (b)     Governmental and Regulatory Consents.........................44
        (c)     HSR Act......................................................44
        (d)     No Injunctions or Restraints.................................44
        (e)     Nasdaq Listing...............................................44
        (f)     Form S-4.....................................................44
7.2     Conditions to Obligations of ILCO....................................45
        (a)     Representations and Warranties...............................45
        (b)     Performance of Obligations of FIC and Merger Sub.............45
        (c)     Tax Opinion..................................................44
        (d)     Fairness Opinion.............................................45
        (e)     Consent......................................................45
        (f)     No Material Adverse Change...................................45
7.3     Conditions to Obligations of FIC.....................................46
        (a)     Representations and Warranties...............................46
        (b)     Performance of Obligations of ILCO...........................46
        (c)     Tax Opinion..................................................46
        (d)     Consents.....................................................46
        (e)     Fairness Opinion.............................................46
        (f)     Investors-NA Option Agreement................................46
        (g)     No Material Adverse Change...................................46
Article VIII    TERMINATION, AMENDMENT AND WAIVER............................47

                                      -59-
8.1     Termination..........................................................47
8.2     Effect of Termination................................................48
8.3     Amendment............................................................48
8.4     Extension; Consent; Waiver...........................................48
8.5     Procedure for Termination, Amendment, Extension, Consent or Waiver...49
Article IX      SURVIVAL OF PROVISIONS.......................................49
9.1     Survival.............................................................49
Article X       NOTICES......................................................49
10.1    Notices..............................................................49
Article XI      MISCELLANEOUS................................................50
11.1    Entire Agreement.....................................................50
11.2    Expenses.............................................................50
11.3    Counterparts.........................................................50
11.4    No Third Party Beneficiary...........................................50
11.5    Governing Law........................................................50
11.6    Assignment; Binding Effect...........................................51
11.7    Headings, Gender, Etc................................................51
11.8    Invalid Provisions...................................................51
11.9    No Recourse Against Others...........................................51

                                      -60-
Acquisition Proposal.........................................................36
Actions......................................................................16
Agreement.....................................................................1
Assumed Stock Options........................................................42
Breaches......................................................................9
Closing.......................................................................2
Closing Date..................................................................2
Code..........................................................................1
Effective Time................................................................2
Employment Arrangements......................................................12
Environmental Laws...........................................................16
Environmental Liabilities....................................................16
ERISA........................................................................12
Exchange Act..................................................................9
Exchange Ratio................................................................3
Family Life..................................................................29
FIC...........................................................................1
FIC Acturial Analyses........................................................29
FIC Benefit Plans............................................................23
FIC Common Stock..............................................................1
FIC Disclosure Letter........................................................22
FIC Fairness Opinion.........................................................24
FIC Financial Statements.....................................................22
FIC Material Adverse Effect..................................................20
FIC Material Contracts.......................................................28
FIC SEC Documents............................................................22
FIC Shareholders Approval....................................................21
FIC Shareholders Meeting.....................................................34
FIC Special Committee........................................................24
FIC Stock Options............................................................20
FIC-Owned Shares..............................................................3
Financial Statements..........................................................9
Form S-4.....................................................................32
Form S-8.....................................................................43
Fractional Shares.............................................................6
GAAP..........................................................................9
Governmental Entity...........................................................9
Hazardous Materials..........................................................16
HSR Act.......................................................................9
ILCO..........................................................................1
ILCO Actuarial Analyses......................................................18
ILCO Benefit Plans...........................................................10

                                      -61-
ILCO Broker/Dealer...........................................................19
ILCO Common Stock.............................................................1
ILCO Disclosure Letter.......................................................10
ILCO Fairness Opinion........................................................17
ILCO Insurance Companies.....................................................17
ILCO Material Adverse Effect..................................................7
ILCO SEC Documents............................................................9
ILCO Shareholders Approval....................................................8
ILCO Special Committee.......................................................17
ILCO Stock Option Plan........................................................7
ILCO Stock Options............................................................7
Indemnified Parties..........................................................37
Indemnified Party............................................................37
Intellectual Property........................................................15
Investors-IN.................................................................17
Investors-NA.................................................................17
Investors-NA Option Agreement................................................38
IRS..........................................................................12
Liens.........................................................................8
Material Breach..............................................................47
Material Contracts...........................................................17
Merger........................................................................2
Merger Consideration..........................................................3
Merger Sub....................................................................1
Paying Agent..................................................................4
Payment Fund..................................................................4
Permits......................................................................11
Potential Acquiror...........................................................35
Proxy Statement/Prospectus...................................................32
Representatives..............................................................34
SEC...........................................................................9
Securities Act................................................................9
Subsidiary....................................................................7
Superior Proposal............................................................36
Surviving Corporation.........................................................2
Tax Return...................................................................15
Taxes........................................................................15
Texas Code....................................................................2
Texas Secretary of State......................................................2
Treasury Shares...............................................................3

                                      -62-
EXHIBIT 99.1

                                      Filed by Financial Industries Corporation
                               pursuant to Rule 425 under the Securities Act of
                                  1933 and deemed filed pursuant to Rule 14a-12
                                        of the Securities Exchange Act of 1934.
                                          Subject Company: Financial Industries
                                        Corporation. Commission File No. 0-4690

FOR IMMEDIATE RELEASE
January 18, 2001

FOR MORE INFORMATION CONTACT
Robert S. Cox
512-404-5128

AUSTIN, TEXAS -- Financial Industries  Corporation (FIC; NASDAQ symbol FNIN) and
InterContinental  Life Corporation (ILCO;  NASDAQ symbol ILCO) jointly announced
today that their  respective  Boards of  Directors  have  approved a  definitive
agreement  whereby FIC would acquire the remaining common shares  (approximately
52%) of  InterContinental  Life  Corporation  which FIC does not currently  own.
Under the terms of the agreement, a newly-established subsidiary of FIC ("Merger
Sub") will be merged with and into ILCO,  with ILCO  continuing as the surviving
entity in the merger transaction as a wholly-owned subsidiary of FIC.

Pursuant to the merger agreement, FIC will issue 1.1 shares of its Common Stock,
$0.20 par value, for each share of ILCO Common Stock,  $0.22 par value, not held
by FIC. The terms of the agreement and the exchange rate were  established  by a
Special  Committee  of the  Board  of  Directors  of each of FIC  and  ILCO  and
recommended to their respective Boards at yesterda's  meeting.  The transaction
is subject to various  conditions  precedent set forth in the merger  agreement,
including the approval of certain matters by the shareholders of FIC and ILCO.

FIC plans to file a  Registration  Statement on Form S-4 in connection  with the
issuance  of shares of its  common  stock in the merger and each of FIC and ILCO
expects  to  mail  a  Joint  Proxy   Statement/Prospectus  to  its  shareholders
containing  information  about  the  merger.  Investors  are  urged  to read the
Registration  Statement  and  Joint  Proxy  Statement/Prospectus  when  they are
available.

                                      -1-
The  Registration  Statement and Joint Proxy  Statement/Prospectus  will contain
important  information  about FIC,  ILCO,  the merger and  related  matters.  In
addition to the Registration Statement and the Joint Proxy Statement/Prospectus,
FIC and ILCO file annual,  quarterly and other  reports,  proxy  statements  and
other information with the Securities and Exchange Commission ("SEC"). Investors
will be able to obtain  copies of these  documents for free through the web site
maintained  by the SEC at  http://www.sec.gov.  FIC,  ILCO and their  respective
directors,  executive  officers and certain  members of management and employees
may be  soliciting  proxies from FIC's and ILCO's  shareholders  in favor of the
merger and  matters  related  to the merger  that will be set forth in the Joint
Proxy Statement/Prospectus. A description of any interests that FIC's and ILCO's
directors  and  executive  officers  have in the merger will be available in the
Joint Proxy Statement/Prospectus.

This press release shall not  constitute an offer of any securities for sale nor
shall  there be any  sale of  securities  in any  state  in  which  such  offer,
solicitation or sale would be unlawful prior to  registration  or  qualification
under the securities laws of any such state.

                                      -2-