Problem with form submit handler using system_settings_form for module admin
Not quite...$form_state is defined (or at least will be if you have a standard installation of Drupal).

The problem is the submitted values are in $form_state['values'], not $form_state. Also, Unless you have #tree set to TRUE on $form['fieldset_1'] the values will be collapsed, and the hierarchy you're expecting won't be there.

This should work:

$file = file_load($form_state['values']['pic_1']);