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<SEC-DOCUMENT>0001047469-08-000557.txt : 20080125
<SEC-HEADER>0001047469-08-000557.hdr.sgml : 20080125
<ACCEPTANCE-DATETIME>20080125154242
ACCESSION NUMBER:		0001047469-08-000557
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20080221
FILED AS OF DATE:		20080125
DATE AS OF CHANGE:		20080125
EFFECTIVENESS DATE:		20080125

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			INNOVATIVE SOLUTIONS & SUPPORT INC
		CENTRAL INDEX KEY:			0000836690
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER PROGRAMMING SERVICES [7371]
		IRS NUMBER:				232507402
		STATE OF INCORPORATION:			PA
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-31157
		FILM NUMBER:		08550877

	BUSINESS ADDRESS:	
		STREET 1:		420 LAPP RD
		CITY:			MALVERN
		STATE:			PA
		ZIP:			19355
		BUSINESS PHONE:		6108899898

	MAIL ADDRESS:	
		STREET 1:		420 LAPP ROAD
		CITY:			MALVERN
		STATE:			PA
		ZIP:			19355
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>a2182035zdef14a.htm
<DESCRIPTION>DEF 14A
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<P><FONT SIZE=3 >
Use these links to rapidly review the document<BR>
<A HREF="#bg42101_innovative_solutions_and_suppo__inn03647">  INNOVATIVE SOLUTIONS AND SUPPORT, INC. 720 Pennsylvania Drive Exton, Pennsylvania 19341 610-646-9800 TABLE OF CONTENTS</A><BR></font>
</P>
<P ALIGN="CENTER"><FONT SIZE=2><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, D.C. 20549  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B> SCHEDULE 14A</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Proxy
Statement Pursuant to Section 14(a) of<BR>
the Securities Exchange Act of 1934 (Amendment No.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;) </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="73%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Filed by the Registrant <FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><BR><FONT SIZE=2>Filed by a Party other than the Registrant <FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
Check the appropriate box:</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Preliminary Proxy Statement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><BR><FONT SIZE=2><B>Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Definitive Proxy Statement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Definitive Additional Materials</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Soliciting Material Pursuant to &sect;240.14a-12<BR></FONT>
</TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=3><B>Innovative Solutions and Support,&nbsp;Inc.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> (Name of Registrant as Specified In Its Charter)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> (Name of Person(s) Filing Proxy Statement, if other than the Registrant)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>Payment of Filing Fee (Check the appropriate box):</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
No fee required.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and&nbsp;0-11.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Title of each class of securities to which transaction applies:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Aggregate number of securities to which transaction applies:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Proposed maximum aggregate value of transaction:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(5)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Total fee paid:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
Fee paid previously with preliminary materials.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
Check box if any part of the fee is offset as provided by Exchange Act Rule&nbsp;0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2><BR>
Amount Previously Paid:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Form, Schedule or Registration Statement No.:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Filing Party:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Date Filed:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="89%"><BR><FONT SIZE=2><B>Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.</B></FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=1,EFW="2182035",CP="INNOVATIVE SOLUTIONS AND SUPPORT",DN="1",CHK=43936,FOLIO='blank',FILE='DISK127:[08ZAC1.08ZAC42101]AA42101A.;6',USER='CARIASB',CD='17-JAN-2008;15:00' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=4><B>INNOVATIVE SOLUTIONS AND SUPPORT,&nbsp;INC.<BR>  </B></FONT><FONT SIZE=2><B>720 Pennsylvania Drive<BR>
Exton, Pennsylvania 19341<BR>
610-646-9800  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">
<P ALIGN="CENTER"><FONT SIZE=2><B> NOTICE OF ANNUAL MEETING OF SHAREHOLDERS  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">

<P><FONT SIZE=2>Dear Shareholder: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
are invited to attend the Annual Meeting of Shareholders of Innovative Solutions and Support,&nbsp;Inc. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Date:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Thursday, February&nbsp;21, 2008 </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Time:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;10:00&nbsp;a.m., Eastern Standard Time </FONT></P>


<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Place:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;720 Pennsylvania Drive, Exton, Pennsylvania 19341 </FONT></P>

<P><FONT SIZE=2><B>Purposes of the Meeting:  </B></FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>To
elect three Class&nbsp;II directors to our Board of Directors for a term of three (3)&nbsp;years and until their successors are duly elected and&nbsp;qualified,
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>To
approve the Company's 2008 Stock-Based Incentive Compensation Plan, and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>To
transact any other business that may properly come before the meeting. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Record Date:  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;January&nbsp;7, 2008 is the record date for the meeting. This means that holders of our common stock at the close of business on that date are
entitled&nbsp;to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>receive
notice of the meeting; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>vote
at the meeting and any adjournment or postponement of the meeting. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event that the meeting is adjourned for one or more periods totaling at least 15&nbsp;days due to the fact that there is not a proper quorum, the shareholders entitled to vote
who attend the adjourned meeting, even if there is not a proper quorum, shall constitute a quorum for the purpose of acting upon any of the named matters&nbsp;above. </FONT></P>

<P><FONT SIZE=2><B>Proxy Solicitation:  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The enclosed proxy is solicited by our Board of Directors. </FONT></P>


<P><FONT SIZE=2><B>Annual Report:  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have enclosed a copy of our 2007 annual report on Form&nbsp;10-K, which is not a part of the proxy soliciting materials. </FONT></P>

<P><FONT SIZE=2><B>Voting:  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your vote is important. Please sign, date and return your proxy card promptly so your shares can be represented, even if you plan to attend the meeting. Please
see the proxy card for instructions on how to vote. You can revoke a proxy at any time prior to its exercise at the meeting by following the instructions in the proxy statement or by attending the
meeting and voting in&nbsp;person. </FONT></P>

<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>

<P><FONT SIZE=2>Geoffrey
S.M. Hedrick<BR></FONT> <FONT SIZE=2><I>Chairman of the Board  </I></FONT></P>

</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>

<P><FONT SIZE=2>January&nbsp;28, 2008 </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=2,EFW="2182035",CP="INNOVATIVE SOLUTIONS AND SUPPORT",DN="1",CHK=326831,FOLIO='blank',FILE='DISK127:[08ZAC1.08ZAC42101]BE42101A.;6',USER='JLAWRENA',CD='23-JAN-2008;17:22' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="bg42101_innovative_solutions_and_suppo__inn03647"> </A>
<BR></FONT><FONT SIZE=2><B>INNOVATIVE SOLUTIONS AND SUPPORT,&nbsp;INC.<BR>  720 Pennsylvania Drive<BR>  Exton, Pennsylvania 19341<BR>  610-646-9800<BR>  <BR>    TABLE OF CONTENTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<A NAME="BG42101_TOC"></A> </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#da42101_about_the_meeting"><FONT SIZE=2><BR>
ABOUT THE MEETING</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#page_da42101_1_3"><FONT SIZE=2><BR>
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#page_da42101_1_3"><FONT SIZE=2><BR>
SECURITY OWNERSHIP OF MANAGEMENT</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#page_da42101_1_4"><FONT SIZE=2><BR>
EQUITY COMPENSATION PLAN INFORMATION</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#page_da42101_1_5"><FONT SIZE=2><BR>
SECTION&nbsp;16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
5</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#dc42101_election_of_directors_(item_1_on_proxy_card)"><FONT SIZE=2><BR>
ELECTION OF DIRECTORS</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
6</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#page_dc42101_1_6"><FONT SIZE=2><BR>
DIRECTORS AND NOMINEES</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
6</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#page_dc42101_1_8"><FONT SIZE=2><BR>
INDEPENDENCE</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#page_dc42101_1_8"><FONT SIZE=2><BR>
COMMITTEES OF THE BOARD OF DIRECTORS</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#page_dc42101_1_10"><FONT SIZE=2><BR>
MEETINGS AND ATTENDANCE</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#dc42101_report_of_the_audit_committee"><FONT SIZE=2><BR>
REPORT OF THE AUDIT COMMITTEE</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#dc42101_related_party_transactions"><FONT SIZE=2><BR>
RELATED PARTY TRANSACTIONS</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
12</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#de42101_2008_stock-based_incentive_com__20002421"><FONT SIZE=2><BR>
2008 STOCK-BASED INCENTIVE COMPENSATION PLAN</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
13</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#dg42101_executive_compensation__dg402503"><FONT SIZE=2><BR>
EXECUTIVE COMPENSATION</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
21</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#page_dg42101_1_21"><FONT SIZE=2><BR>
COMPENSATION DISCUSSION AND ANALYSIS</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
21</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#dk42101_shareholder_proposals_for_2009__sha02364"><FONT SIZE=2><BR>
SHAREHOLDER PROPOSALS FOR 2009 ANNUAL MEETING AND OTHER MATTERS</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
31</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="94%" VALIGN="TOP"><A HREF="#dk42101_independent_registered_public_accounting_firm"><FONT SIZE=2><BR>
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></A></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
31</FONT></TD>
</TR>
</TABLE></DIV>
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<P ALIGN="CENTER"><FONT SIZE=4><B>INNOVATIVE SOLUTIONS AND SUPPORT,&nbsp;INC.<BR>  </B></FONT><FONT SIZE=2><B>720 Pennsylvania Drive<BR>
Exton, Pennsylvania 19341<BR>
610-646-9800  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">
<P ALIGN="CENTER"><FONT SIZE=3><B>PROXY STATEMENT<BR>
for<BR>
Annual Meeting of Shareholders<BR>
February&nbsp;21, 2008  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are sending you this proxy statement and the enclosed proxy card because our Board of Directors is soliciting your proxy to vote your shares at
our 2008 annual meeting of shareholders. The annual meeting will be held on February&nbsp;21, 2008 at 10:00&nbsp;a.m., local time, at our corporate offices at 720 Pennsylvania Drive, Exton,
Pennsylvania. We began mailing this proxy statement and the proxy card on or about January&nbsp;28,&nbsp;2008. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="da42101_about_the_meeting"> </A>
<A NAME="toc_da42101_1"> </A>
<BR></FONT><FONT SIZE=2><B>ABOUT THE MEETING    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Who can vote?  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You can vote if, as of the close of business on January&nbsp;7, 2008, you were a shareholder of record of our common stock. On that date, 16,896,854 shares of
our common stock were outstanding and entitled to vote. We do not have any other classes of voting stock outstanding other than our common stock. Each share of common stock is entitled to one vote,
and there are no cumulative voting rights when voting for&nbsp;directors. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you and other residents at your mailing address own shares of common stock in "street name," your broker or bank may have notified you that your household will receive only one annual
report and proxy statement for each company in which you hold stock through that broker or bank. This practice is known as "house-holding." Unless you responded that you did not want to participate in
"house-holding," you were deemed to have consented to the process. Each shareholder will continue to receive a separate proxy card or voting instruction&nbsp;card. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you did not receive an individual copy of this year's proxy statement or our annual report, we will send a copy to you if you address a written request to our Chief Financial Officer,
John&nbsp;C. Long, 720 Pennsylvania Drive, Exton, Pennsylvania 19341, telephone (610)&nbsp;646-9800. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you would like to receive your own set of the Company's future annual report and proxy statement, or if you share an address with another Company shareholder and together both of you
would like to receive only a single set of the Company's annual disclosure documents, you should contact your broker or bank or you may contact the Company at the above address and
phone&nbsp;number. </FONT></P>

<P><FONT SIZE=2><B>What constitutes a quorum?  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The presence at the annual meeting, in person or by proxy, of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to
cast on a particular matter to be acted upon at the meeting shall constitute a quorum for the purpose of consideration and action on the matter. Abstentions from voting and broker
"non-votes" will be counted toward a quorum. A broker "non-vote" occurs when the nominee holding a shareholder's shares does not vote on a particular proposal because the
nominee does not have discretionary voting power on that item and has not received instructions from the shareholder. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

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<P><FONT SIZE=2><B>What vote is required and what is the method of calculation?  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The nominees for director who receive a plurality of the shares of common stock present or represented by proxy at the annual meeting will be elected. Approval of
each other matter to be voted on at the annual meeting requires the affirmative vote of a majority of the votes properly cast at the meeting with respect to such matter. Abstentions or broker
"non-votes" will not be counted for or against matters to be acted on at the annual&nbsp;meeting. </FONT></P>

<P><FONT SIZE=2><B>What matters will be voted on?  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board does not intend to bring any other matters before the annual meeting except the matter listed in the notice, and the Board is not aware of anyone else
who will submit any other matters to be voted on. However, if any other matters properly come before the annual meeting, the people named on the proxy card, or their substitutes, will be authorized to
vote on those matters in their own&nbsp;judgment. </FONT></P>

<P><FONT SIZE=2><B>How do I vote by proxy?  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When you return your properly signed and dated proxy card prior to the annual meeting, your shares will be voted in accordance with your instructions marked on
the proxy card. If you sign your proxy card but do not specify how you want your shares to be voted, they will be voted as recommended by the Board of Directors. You may also vote electronically
through the Internet by following the instructions included with your proxy&nbsp;card. </FONT></P>

<P><FONT SIZE=2><B>Can I change my vote after I return my proxy card?  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes. You can change or revoke your proxy at any time before the annual meeting either by notifying our Secretary in writing or by sending another executed proxy
dated later than the first proxy card. Attendance at the annual meeting will not cause your previously granted proxy to be revoked unless you specifically so request. For shares held beneficially by
you, you may accomplish this by submitting new voting instructions to your broker or&nbsp;nominee. </FONT></P>


<P><FONT SIZE=2><B>Can I vote in person at the annual meeting instead of voting by proxy?  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes. However, we encourage you to complete and return the enclosed proxy card to ensure that your shares are represented and voted. If you attend the annual
meeting in person, you may then vote in person even though you returned your proxy&nbsp;card. </FONT></P>

<P><FONT SIZE=2><B>Who pays for this proxy solicitation?  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do. We will pay all costs in connection with the meeting, including the cost of preparing, assembling and mailing proxy materials, handling and tabulating the
proxies returned, and charges of brokerage houses, nominees and fiduciaries in forwarding proxy materials to our beneficial owners. </FONT></P>

<P><FONT SIZE=2><B>Who can help answer your questions?  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you have questions about the annual meeting or would like additional copies of this proxy statement, you should contact our Chief Financial Officer,
John&nbsp;C. Long, 720 Pennsylvania Drive, Exton, Pennsylvania 19341, telephone (610)&nbsp;646-9800. </FONT></P>

<P><FONT SIZE=2><B>Annual Report  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our annual report to shareholders accompanies this proxy statement. On written request, we will provide, without charge, a copy of our annual report on
Form&nbsp;10-K for&nbsp;the year ended September&nbsp;30, 2007 (including a list briefly describing the exhibits thereto), filed with the Securities and Exchange Commission (the
SEC), to any record holder or beneficial owner of our common stock on January&nbsp;7, 2008, the record date, or to any person who subsequently becomes such a record holder or beneficial </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>owner.
Requests should be directed to the attention of our Chief Financial Officer at the address set forth&nbsp;above. </FONT></P>


<P><FONT SIZE=2><B>Security Ownership of Principal Shareholders  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information with respect to the beneficial ownership, as of January&nbsp;7, 2008, of each person who we knew to be the
beneficial owner of more than 5% of our common stock. To the knowledge of the Company, each of the shareholders named below has sole voting and investment power with respect to such shares, unless
otherwise indicated. The information provided in the table is based on our records, information filed with the Securities and Exchange Commission and information provided to the&nbsp;Company. </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="66%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Common Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="66%" ALIGN="LEFT"><FONT SIZE=1><B>Name of Beneficial Owner<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Percent of<BR>
Class(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Geoffrey S. M. Hedrick(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3,750,466</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>22.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Federated Investors,&nbsp;Inc.(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,420,450</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>14.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>State Teachers Retirement System of Ohio(4)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,208,550</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>13.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Bank of America Corporation(5)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,714,585</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Putnam Investment Management,&nbsp;Inc.(6)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>985,254</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Arbor Capital Management&nbsp;LLC(7)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>857,200</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
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<UL>
<UL>
<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>As
used in this table, beneficial ownership means the sole or shared power to vote or direct the voting of a security, or the sole or shared investment power with respect to a
security (i.e.,&nbsp;the power to dispose, or direct the disposition, of a security). A person is deemed as of any date to have beneficial ownership of any security that such person has the right to
acquire within 60&nbsp;days after such date. Percentage ownership is based upon 16,898,354 shares of common stock outstanding as of January&nbsp;7,&nbsp;2008.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Hedrick's
address is c/o Innovative Solutions and Support,&nbsp;Inc., 720 Pennsylvania Drive, Exton, PA 19341. The amount includes options to purchase 1,500 shares, which
were exercisable as of Januaty 7, 2008, or within 60&nbsp;days from such&nbsp;date.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Based
solely on Schedule&nbsp;13G filed February&nbsp;13, 2007. Federated Investors,&nbsp;Inc.'s address is Federated Investors Tower, Pittsburgh PA.&nbsp;15222
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Based
solely on Schedule&nbsp;13G filed March&nbsp;20, 2007. State Teachers Retirement System of Ohio's address is 275 East Broad Street, Columbus OH.&nbsp;43215
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>Based
solely on Schedule&nbsp;13G September&nbsp;12, 2007. Bank of America Corporation's address is 100 North Tryon Street, Floor 25, Bank of America Corporate Center, Charlotte,
NC.&nbsp;28255.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>Based
solely on Schedule&nbsp;13G filed February&nbsp;13, 2007. Putnam Investment Management's address is One Post Office Square, Boston, MA.&nbsp;02109
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD><FONT SIZE=2>Based
solely on Form&nbsp;13F filed November&nbsp;15, 2007. Arbor Capital Management's address is 1 Financial Plaza, 120 S. Sixth Street, Suite&nbsp;1000, Minneapolis,
MN.&nbsp;55402 </FONT></DD></DL>
</UL>
</UL>
<BR>

<P><FONT SIZE=2><B>Security Ownership of Management  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information with respect to the beneficial ownership as of January&nbsp;7, 2008 of (i)&nbsp;each director,
(ii)&nbsp;our chief executive officer and each other executive officer and (iii)&nbsp;all the directors and executive officers as a group. Each of the shareholders named below has sole voting and
investment power with respect to such shares, unless otherwise indicated. The information </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>

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<BR>

<P><FONT SIZE=2>provided
in the table is based on our records, information filed with the Securities and Exchange Commission and information provided to the&nbsp;Company. </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="57%" ALIGN="LEFT"><FONT SIZE=1><B>Name of Beneficial Owner<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" ALIGN="CENTER"><FONT SIZE=1><B>Percent of Class(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Geoffrey S. M. Hedrick</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>3,750,466</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>21.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Roman G. Ptakowski</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>180,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Robert E. Mittelstaedt, Jr.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>126,337</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Winston J. Churchill</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>62,833</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>James J. Reilly</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>56,549</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Robert H. Rau</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>34,802</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Glen R. Bressner</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>14,832</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Ivan M. Marks</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>16,010</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Raymond J. Wilson</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1,386</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>John C. Long</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>All executive officers and directors as a group<BR>
(10 persons)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>4,243,215</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>(5)</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>24.8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
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<UL>
<UL>
<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Less
than 1%.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>As
used in this table, beneficial ownership means the sole or shared power to vote or direct the voting of a security, or the sole or shared investment power with respect to a
security (i.e.,&nbsp;the power to dispose, or direct the disposition, of a security). A person is deemed as of any date to have beneficial ownership of any security that such person has the right to
acquire within 60&nbsp;days after such date. Percentage ownership is based upon 17,130,403 shares of common stock outstanding as of January&nbsp;7,&nbsp;2008.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Includes
options to purchase 1,500 shares, which were exercisable as of January&nbsp;7, 2008, or within 60&nbsp;days from such&nbsp;date.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Represents
the total number of outstanding options to purchase shares, which were exercisable as of January&nbsp;7, 2008, or within 60&nbsp;days from such&nbsp;date
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Includes
options to purchase 52,049 shares, which were exercisable as of January&nbsp;7, 2008, or within 60&nbsp;days from such&nbsp;date. Mr.&nbsp;Reilly was our chief
financial officer as of January&nbsp;7, 2008 and during all of fiscal 2007.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>Includes
options to purchase 233,549 shares, which were exercisable as of January&nbsp;7, 2008, or within 60&nbsp;days from such&nbsp;date. </FONT></DD></DL>
</UL>
</UL>

<P><FONT SIZE=2><B>Equity Compensation Plan Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table gives information about our common stock that may be issued upon the exercise of options and rights under all of our existing equity
compensation plans and arrangements as of September&nbsp;30, 2007, including the 1998 Stock Option Plan and the 2003 Restricted Stock&nbsp;Plan. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="30%" ALIGN="LEFT"><FONT SIZE=1><B>Plan Category<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="20%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Securities<BR>
to be issued upon<BR>
exercise of outstanding<BR>
options, warrants and rights</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-average<BR>
exercise price of<BR>
outstanding<BR>
options,<BR>
warrants and rights</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Securities<BR>
remaining available for<BR>
future issuance under<BR>
equity compensation<BR>
plans (excluding securities<BR>
reflected in second column)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="30%"><FONT SIZE=2>Equity compensation plans approved by security holders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>576,424</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>10.33</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>1,764,483</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="30%"><FONT SIZE=2>Equity compensation plans not approved by security holders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>0.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="30%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="30%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>576,424</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>10.33</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>1,764,483</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>(1)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="30%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Includes
1,684,000 stock options from the 1998 Stock Option Plan and 80,483 shares from the 2003 Restricted Stock&nbsp;Plan. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_da42101_1_5"> </A>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
fiscal years ended September&nbsp;30, 2007, 2006 and 2005 awards to our non-employee directors under the 2003 Restricted stock Plan were 15,056, 15,396, and 15,828
shares respectively. </FONT></P>

<P><FONT SIZE=2><B>1998 Stock Option Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's 1998 Stock Option Plan was adopted in order to recognize the contributions made by the Company's employees, directors, consultants and advisors, to
provide such persons with additional incentives to devote their efforts to the Company's future success and to improve the Company's ability to attract, retain and motivate individuals through the
receipt of Company stock options. The maximum number of shares of the Company's stock available under the 1998 Stock Option Plan is 3,389,025 (after giving effect to stock splits). The 1998 Stock
Option Plan authorizes the grant of "incentive stock options" (within the meaning of Section&nbsp;422 of the Code) and non-qualified stock options, such options to vest and become
exercisable as specified in separate written agreements between the Company and the option recipient. Unless otherwise specified in such agreement, all outstanding options become fully vested and
exercisable upon a change in control. The 1998 Stock Option Plan expires on November&nbsp;13,&nbsp;2008. </FONT></P>

<P><FONT SIZE=2><B>2003 Restricted Stock Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's 2003 Restricted Stock Plan was adopted in order to provide non-employee directors with restricted stock grants that would encourage them
to contribute to the growth of the Company and benefit the Company's shareholders. The maximum number of shares of the Company's stock available under the 2003 Restricted Stock Plan is 1,500,000
(after giving effect to stock splits). Each non-employee director is eligible to receive an award of restricted stock on an annual basis, with such award vesting over the course of the
fiscal year in equal installments. Pursuant to the terms of the 2003 Restricted Stock Plan, upon a change in control all restrictions applicable to restricted stock awards that are then outstanding
lapse in&nbsp;full. </FONT></P>

<P><FONT SIZE=2><B>Section&nbsp;16(A) Beneficial Ownership Reporting Compliance  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;16(a) of the Securities Exchange Act of 1934, as amended, requires our officers (as defined under Section&nbsp;16(a) of the Securities Exchange
Act), directors and persons who own greater than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission.
Based solely on a review of the forms we have received and on written representations from certain reporting persons that no such forms were required for them, we believe that, except as set forth
below, during fiscal year 2007, all of the Section&nbsp;16(a) filing requirements applicable to our officers, directors and 10% beneficial owners were complied with by such&nbsp;persons. </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Glen
R. Bressner filed a Form&nbsp;4 on January&nbsp;2, 2008 for a transaction that occurred on June&nbsp;12,&nbsp;2007.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Raymond
J. Wilson filed a Form&nbsp;4 on January&nbsp;9, 2008 for a transaction that occurred on February&nbsp;9,&nbsp;2007. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<UL>
<UL>
</UL>
</UL>
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NAME="page_dc42101_1_6"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dc42101_election_of_directors_(item_1_on_proxy_card)"> </A>
<A NAME="toc_dc42101_1"> </A>
<BR></FONT><FONT SIZE=2><B>ELECTION OF DIRECTORS<BR>  <BR>    (Item&nbsp;1 on Proxy Card)    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the annual meeting, the shareholders will elect (three) Class&nbsp;II directors to hold office until the annual meeting of shareholders in 2011 and until
their respective successors have been duly elected and qualified. The Board is divided into three classes serving staggered three-year terms, the term of one class of directors to expire
each year. The term of the Class&nbsp;II directors expires at the 2008 annual meeting of shareholders. Upon the recommendation of the Nominating/Corporate Governance Committee, the Board has
nominated Messrs.&nbsp;Glen R. Bressner, Robert E. Mittelstaedt, Jr. and Raymond J. Wilson to serve as directors. Each individual is currently serving as a Class&nbsp;II director&nbsp;and has
indicated a willingness to continue serving as a director. Unless contrary instructions are given, the shares represented by a properly executed proxy will be voted
"</FONT><FONT SIZE=2><B>FOR</B></FONT><FONT SIZE=2>" the election of Messrs.&nbsp;Bressner, Mittelstaedt and Wilson. The three nominees receiving a plurality of the votes cast for director will be
elected. Should any of the nominees become unavailable to accept election as a director, the persons named in the enclosed proxy will vote the shares that they represent for the election of such other
person as the Board may recommend. </FONT><FONT SIZE=2><B>The Board of Directors recommends voting "FOR" the nominees for Class&nbsp;II&nbsp;directors</B></FONT><FONT SIZE=2>. </FONT></P>


<P><FONT SIZE=2><B>Directors and&nbsp;Nominees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The current members of the Board of Directors, including the nominees for Class&nbsp;II directors, together with certain information about them, are set
forth&nbsp;below: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="35%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="4%" ALIGN="CENTER"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Director<BR>
Since</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Term<BR>
Expires</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="35%" ALIGN="CENTER"><FONT SIZE=1><B>Positions with the Company</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2><I>Class&nbsp;I Directors</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="35%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>Ivan M. Marks</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>66</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1996</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2010</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="35%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>Robert H. Rau</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>71</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2001</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2010</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="35%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><BR><FONT SIZE=2><I>Class&nbsp;II Directors</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="35%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>Glen R. Bressner</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>47</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2008</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="35%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>Robert E. Mittelstaedt, Jr.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>64</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1989</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2008</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="35%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>Raymond J. Wilson</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>62</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2008</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="35%"><FONT SIZE=2>Director, Chief Executive Officer</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><BR><FONT SIZE=2><I>Class&nbsp;III Directors</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="35%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>Geoffrey S. M. Hedrick</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>65</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1988</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2009</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="35%"><FONT SIZE=2>Director, Chairman of the Board</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>Winston J. Churchill</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>67</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1990</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2009</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="35%"><FONT SIZE=2>Director</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ivan M. Marks.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Marks retired January&nbsp;31, 2005 as Vice President-Controller of Parker Aerospace Group, which
is the aerospace segment of Parker Hannifin Corporation, a position he held since 1979. Mr.&nbsp;Marks holds a Bachelor of Science degree in Business Administration from Drake University and is a
Certified Public Accountant. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Robert H. Rau.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Rau retired December&nbsp;31, 1998 as President of the Aerostructures Group of The Goodrich
Company. Prior to its merger with Goodrich, Mr.&nbsp;Rau was President and Chief Executive Officer of Rohr,&nbsp;Inc. from 1993 to 1997. Before joining Rohr, he was an Executive Vice President of
Parker Hannifin Corporation and President of its Aerospace Sector. In addition, Mr.&nbsp;Rau is a past member of the Board of Governors of the Aerospace Industries Association, a past Chairman of
the General Aviation Manufacturers Association, and Chairman of the International Advisory Panel of Singapore Aerospace. Mr.&nbsp;Rau received a Bachelor of Arts degree in Business Administration
from Whittier College in&nbsp;1962. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Glen R. Bressner.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Bressner has been a partner of Mid-Atlantic Venture Funds, a venture capital firm,
since 1997. Mr.&nbsp;Bressner is also a partner of NEPA Venture Fund,&nbsp;L.P., a venture capital </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_dc42101_1_7"> </A>
<BR>

<P><FONT SIZE=2>firm,
a position he has held since 1985. From 1996 to 1997, Mr.&nbsp;Bressner served as the Chairman of the Board of Directors of the Greater Philadelphia Venture Group. Mr.&nbsp;Bressner holds a
Bachelor of Science degree in Business Administration from Boston University and a Masters of Business Administration degree from Babson&nbsp;College. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Robert E. Mittelstaedt, Jr.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Mittelstaedt served as our Non-Executive Chairman of the Board of
Directors from 1989 to 1997. Since July&nbsp;1, 2004 Mr.&nbsp;Mittelstaedt has been Dean of the W.P. Carey School of Business at Arizona State University. Prior to that, Mr.&nbsp;Mittelstaedt
was Vice Dean of The Wharton School of the University of Pennsylvania since 1989. Mr.&nbsp;Mittelstaedt also serves on the Board of Directors of Laboratory Corporation of America
Holdings,&nbsp;Inc. and is a member of the Board of Directors of W.P. Carey&nbsp;&amp;&nbsp;Co.&nbsp;LLC. Mr.&nbsp;Mittelstaedt holds a Bachelor of Science degree in Mechanical Engineering from
Tulane University and a Masters of Business Administration degree from The Wharton School of the University of Pennsylvania. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Raymond J. Wilson C.B.E.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Wilson joined the Company's Board of Directors in February 2007 and was named Chief
Executive Officer, Designate in June 2007. On November&nbsp;30, 2007, Mr.&nbsp;Wilson became Chief Executive Officer of the Company and continues as a member of the Board of Directors.
Mr.&nbsp;Wilson was employed as an independent Aerospace Manufacturing Consultant from January 2004 to June 2007. Mr.&nbsp;Wilson in the period from January 2001 to January 2004, served on the
Executive Committee for Airbus S.a.s. At that time, he also served as Executive Vice President for Procurement with the Toulouse, France-based Company. Prior to that, from September 1997 to January
2001,
Mr.&nbsp;Wilson was Managing Director for Airbus U.K. as well as a member of the Airbus Executive Board in the three years prior to the formation of Airbus as a&nbsp;company. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
part of New Year's Honours 2004, Wilson was honored by Her Majesty Queen Elizabeth II as a Commander of the British Empire (C.B.E.) for his services to the Aircraft Industry. Wilson
is a graduate of Napier University in Edinburgh, Scotland. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Geoffrey S. M. Hedrick.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Hedrick founded the Company in February 1988 and has been our Chairman of the Board since
1997. Mr.&nbsp;Hedrick resigned from his position as Chief Executive Officer of the Company on November&nbsp;30, 2007 but has continued as Chairman of the Board of directors. Prior to founding the
Company, Mr.&nbsp;Hedrick served as President and Chief Executive Officer of Smiths Industries, North American Aerospace Companies. He also founded Harowe Systems,&nbsp;Inc. in 1971, which was
subsequently acquired by Smiths Industries. Mr.&nbsp;Hedrick has over 35&nbsp;years of experience in the avionics industry, and he holds a number of patents in the electronics, optoelectric,
electromagnetic, aerospace and contamination-control fields. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Winston J. Churchill.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Churchill has been managing general partner of SCP Partners since he founded it in 1996, and
has over twenty-five years experience in private equity investing. Previously, he had formed Churchill Investment Partners,&nbsp;Inc. in 1989 and CIP Capital,&nbsp;L.P., another
venture capital fund, in 1990. Prior to that, he was a managing partner of a private investment firm that specialized in leveraged buyouts on behalf of Bessemer Securities Corporation. From 1967 to
1983, he practiced law at the Philadelphia firm of Saul, Ewing, Remick and Saul and served as Chairman of its Banking and Financial Institutions Department, Chairman of the Finance Committee and a
member of its Executive Committee. He is a Director of Amkor Technology,&nbsp;Inc., Rodman&nbsp;&amp; Renshaw Capital Group,&nbsp;Inc. and Griffin Land and Nurseries,&nbsp;Inc., as well as a
number of private companies. From 1989 to 1993, he served as Chairman of the Finance Committee of the Pennsylvania Public School Employees' Retirement System. He is currently a trustee of Fordham
University, Georgetown University, Immaculata University, American Friends of New College Oxford, England, The Gesu School and Young Scholars Charter School. He was awarded a BS in Physics, summa cum
laude, from Fordham University followed by a M.A. in Economics from Oxford University where he studied as a Rhodes Scholar, and a J.D. degree from Yale Law&nbsp;School. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<P><FONT SIZE=2><B>Independence  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board has determined in its business judgment that five (5)&nbsp;of the Company's seven&nbsp;(7)&nbsp;directors are independent as defined in the
applicable NASDAQ listing standards, including that each member is free of any relationships that would interfere with his individual exercise of independent judgment. The
following directors were determined to be independent: Glen R Bressner, Winston J. Churchill, Ivan M. Marks, Robert E. Mittelstaedt, Jr. and Robert H.&nbsp;Rau. </FONT></P>

<P><FONT SIZE=2><B>Committees of the Board of Directors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board maintains four standing committees: Audit, Compensation, Investment, and Nominating/Corporate Governance. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee makes recommendations to the Board with respect to various auditing and accounting
matters, including the selection and compensation of our independent registered public accounting firm, the scope of our annual audits, fees to be paid to the independent registered public accounting
firm, the performance and independence of our independent registered public accounting firm and our accounting practices. The Audit Committee approves all services provided to the Company by the
independent registered public accounting firm. The Audit Committee has established procedures for the receipt, retention and treatment, on a confidential basis, of complaints received by the Company,
regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. In
addition, the Audit Committee has responsibility for, among other things, the planning and review of our annual and periodic reports and accounts and the involvement of our independent registered
public accounting firm in that process. Messrs.&nbsp;Rau (Chairman), Bressner and Marks are currently members of the Audit Committee. The Audit Committee is comprised solely of independent members,
as independence for audit committee members is defined in the applicable Nasdaq listing standards In addition, the Board has determined in its business judgment that each member of the Audit Committee
is financially literate and that at least one of the Audit Committee members, Mr.&nbsp;Marks, is an audit committee financial expert, as defined by SEC rules and regulations. The Audit Committee has
adopted a formal written Charter that has been approved by the Board. The Charter specifies the scope of the Audit Committee's responsibilities and procedures for carrying out such responsibilities. A
copy of the Charter is available on our website, www.innovative-ss.com under the heading Investor Relations. Please note that none of the information on the Company's website is
incorporated by reference in this proxy statement. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee of the Board of Directors is composed of two directors,
Messrs.&nbsp;Churchill (Committee Chairman), and Mittelstaedt, each of whom, in the judgment of the Board of Directors, was found to be "independent" as defined by the applicable NASDAQ listing
standards. The Compensation Committee is responsible for setting and administering the policies that govern annual executive salaries, bonuses and stock ownership programs. The Compensation Committee
annually evaluates the performance of the Company's Chairman and Chief Executive Officer and determines or recommends to the full Board the annual base salary, bonus and equity-based compensation for
the Chairman and Chief Executive Officer. The Compensation Committee relies on the recommendations of the Chairman and Chief Executive Officer, following the Chairman's and/or Chief Executive
Officer's annual performance reviews of other executive officers, in setting annual salaries, bonuses and equity-based compensation for other executive officers. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Compensation Committee is responsible for reviewing and overseeing the Company's benefit plans and stock option plans for our employees, consultants, directors and other individuals
compensated by us, including our Chairman and Chief Executive Officer. The Compensation Committee has adopted a formal written Charter that has been approved by the Board. The Charter specifies the
scope of the Compensation Committee's responsibilities and procedures for carrying out </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

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<P><FONT SIZE=2>such
responsibilities. A copy of the Charter is available on our website, www.innovative-ss.com under the heading Investor Relations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Compensation Committee has not retained an outside consultant to advise it regarding Company compensation practices. Instead, the Compensation Committee independently determines the
appropriate levels of compensation for executive officers and directors taking into account, among other factors, the performance of such individuals (as determined in annual reviews conducted by the
Compensation Committee or the Chief Executive Officer), the Company's financial performance, cost of living, prior compensation practices and recruitment and retention needs. The Compensation
Committee relies on the recommendations of the Company's Chairman and Chief Executive Officer in determining whether and how much discretionary bonus may be paid to the Company's employees (including
executive officers) in the event the Company's financial performance exceeds budgeted&nbsp;goals. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation Committee Interlocks and Insider Participation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No member of the Compensation Committee is a former or current
executive officer or employee of the Company. There are no compensation committee interlocks between us and any other entity involving us or such entity's executive officers or board&nbsp;members. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Investment Committee assists the Board of Directors in fulfilling its oversight responsibilities
with respect to recommendations pertaining to the investment of excess capital. Messrs.&nbsp;Churchill (Chairman), Bressner and Rau are currently the members of the Investment Committee. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nominating/Corporate Governance Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have a Nominating/Corporate Governance Committee, consisting of three
non-employee directors. The Committee has adopted a formal written Charter that has been approved by the Board. The Charter specifies the scope of the Committee's responsibilities and
procedures for carrying out such responsibilities. A copy of the Charter is available on our website, </FONT><FONT SIZE=2><I>www.innovative-ss.com</I></FONT><FONT SIZE=2> under the
heading Investor Relations. The Committee members are Messrs.&nbsp;Mittelstaedt (Chairman), Churchill and Bressner, each of whom is independent, as that term is defined in the applicable Nasdaq
listing standards. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Nominating/Corporate Governance Committee functions include establishing the criteria for selecting candidates for nomination to the Board; actively seeking candidates who meet those
criteria; and making recommendations to the Board of nominees to fill vacancies on, or as additions to, the Board and to monitor the Company's corporate governance structure. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Committee seeks director candidates based upon a number of qualifications/criteria, including their independence, knowledge, judgment, character, leadership skills, education,
experience, financial literacy, standing in the community and ability to foster a diversity of backgrounds and views and to complement the Board's existing strengths relative to the Company's
business. In the case of potential independent director candidates, such eligibility criteria shall be in accordance with SEC and NASDAQ&nbsp;rules. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Committee conducts an annual assessment of the size and composition of the Board and Committees and reviews with the Board the appropriate skills and characteristics required of
Board members. The Committee has not yet relied upon third-party search firms to identify board candidates, but reserves the right to do so as required. To date the Committee has relied upon
recommendations from a wide variety of its business contacts, including current executive officers, directors, community leaders, and shareholders as a source for potential board candidates. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Nominating/Corporate Governance Committee nor the Company has engaged, or paid any fees to a search firm in connection with the nomination of any of the Class&nbsp;II
directors for election at the Annual Meeting covered by this Proxy Statement. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Committee will consider nominees for election to the Board that are timely recommended by shareholders provided that a complete description of the nominees' qualifications,
experience and </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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<P><FONT SIZE=2>background,
together with a statement signed by each nominee in which he or she consents to act as such, accompany the recommendations. Such recommendations should be submitted in writing to the
attention of Chairman, Nominating/Corporate Governance Committee, at our address at 720&nbsp;Pennsylvania Drive, Exton, PA, 19341, and should not include self-nominations.
Section&nbsp;3.10 of the Company's by-laws contains provisions setting forth the requirements applicable to a shareholder nomination for director. These requirements are summarized in
this Proxy Statement under the caption "Shareholder Proposals for 2009 Annual Meeting And Other&nbsp;Matters". </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
of the current nominees for director listed under the caption "ELECTION OF DIRECTORS" is an existing director standing for re-election. In connection with the 2008
Annual Meeting, the Nominating/Corporate Governance Committee did not receive any recommendation for a candidate from any shareholder or group of shareholders owning more than 5% of our
common&nbsp;stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Annual Meeting of Shareholders provides an opportunity each year for shareholders to ask questions of or otherwise communicate directly with members of our Board of Directors on
matters relevant to the Company. Each of our directors is requested to attend in person the Annual Meeting. All seven Company directors attended the Company's 2007 Annual Meeting of Shareholders. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, you may communicate with the Board, or if applicable, to a specific individual director, by sending a written communication to the attention of the Board or such individual
director at the following address: 720 Pennsylvania Drive, Exton, PA, 19341, (fax (610)&nbsp;646-0150). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Copies
of each written communication received at such address will be provided to the Board or to the specific individual director unless such communication is considered, in the
reasonable judgment of the Corporate Secretary or other appropriate company officer, to be improper for submission to the intended recipient. Examples of shareholder communications that would be
considered improper for submission include, without limitation, customer complaints, solicitations, communications that do not relate directly or indirectly to the Company or the Company's business or
communications that relate to improper or irrelevant topics. </FONT></P>


<P><FONT SIZE=2><B>Meetings and Attendance  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the fiscal year ended September&nbsp;30, 2007, the full Board held six meetings. From time to time during fiscal year 2007 the Board met in executive
session without members of management present. The Audit Committee met nine times, the Investment, Compensation and the Nominating/Corporate Governance Committees each met one time. All directors
attended at least 80% of the meetings of the full Board and the meetings of the committees on which they&nbsp;served. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>The following report of the Audit Committee will not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement
into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this information by
reference. The following report shall not otherwise be deemed filed under such&nbsp;Acts.</I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dc42101_report_of_the_audit_committee"> </A>
<A NAME="toc_dc42101_2"> </A>
<BR></FONT><FONT SIZE=2><B>REPORT OF THE AUDIT COMMITTEE    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee assists our Board in its oversight of our financial reporting process. The Committee operates pursuant to a charter. As set forth in the
charter, management of the Company is responsible for the preparation, presentation and integrity of our financial statements, our accounting and financial reporting principles and internal controls
and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The Company's independent registered public accounting firm is responsible for auditing our
financial statements and expressing an opinion as to their conformity with generally accepted accounting principles in the United States of America and for reviewing the Company's unaudited interim
financial statements. The Audit Committee reviews and reassesses the adequacy of the charter on an annual basis. It is not the Audit Committee's duty or </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

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<P><FONT SIZE=2>responsibility
to conduct auditing or accounting reviews or procedures. The Committee will however take the appropriate actions to set the overall corporate "tone" for quality financial reporting,
sound business risk practices, and ethical behavior. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Audit Committee makes recommendations to the Board with respect to the selection and compensation of our independent registered public accounting firm, the scope of our annual
audits, and the fees to be paid to the independent registered public accounting firm. In addition, the Committee monitors the performance and independence of our independent registered public
accounting firm and approves all services provided to the Company by the independent registered public accounting firm. The Committee consults with and reviews recommendations made by the independent
registered public accounting firm with respect to financial statements, financial records and financial controls of the Company. The Audit Committee meets with management periodically to consider the
adequacy of the Company's internal controls and discusses with management the Company's disclosure controls and&nbsp;procedures. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board, in its business judgment, has determined that each of the three directors on the Audit Committee is independent as required by Rule&nbsp;4200(a)(15) of the listing standards
of the Nasdaq Stock Market,&nbsp;LLC. In addition, the Board has determined that each member of the Audit Committee is financially literate and at least one of the Audit Committee members,
Mr.&nbsp;Marks, is an audit committee financial expert as defined by SEC rules and regulations. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the performance of its oversight function, the Audit Committee has reviewed and discussed the audited financial statements for the year ending September&nbsp;30, 2007 with
management of the Company and its independent registered public accounting firm, who is responsible for expressing an opinion on the conformity of those financial statements with accounting principles
generally accepted in the United States of America, its judgment as to the quality, not just the acceptability, of the Company's accounting principles, as well as an opinion on the effective operation
of the Company's internal control over financial reporting. The Audit Committee has also discussed with the independent registered public accounting firm the matters required to be discussed by
Statement on Auditing
Standards No.&nbsp;114, "The Auditor's Communication with those charged with Governance", AU 380, as currently in effect. Finally, the Audit Committee has received the written disclosures and the
letter from the independent registered public accounting firm required by Independence Standards Board Standard No.&nbsp;1, Independence Discussions with Audit Committees, as currently in effect,
and has considered whether the provision of non-audit services by the independent registered public accounting firm is compatible with maintaining the independent registered public
accounting firm's independence and has discussed with the the independent registered public accounting firm their independence. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Audit Committee discussed with the Company's independent registered public accounting firm the overall scope and plans for its 2007 audit and met with them both with and without
management present, to discuss the results of its examination, its evaluation of the Company's internal controls and the overall quality of the Company's financial reporting. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
upon the review, reports and discussions described in this report, and subject to the limitations on the role and responsibilities of the Audit Committee referred to above and in
the charter, the Audit Committee recommended to the Board of Directors that the audited financial statements for the year ending September&nbsp;30, 2007 be included in the Company's Annual Report on
Form&nbsp;10-K for&nbsp;the year ended September&nbsp;30, 2007 as filed with the Securities and Exchange Commission. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Submitted by the Audit Committee:  </I></FONT></P>

<P><FONT SIZE=2>Robert
H. Rau (Chairman)<BR>
Glen R. Bressner<BR>
Ivan M. Marks </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

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<BR></FONT><FONT SIZE=2><B>Related Party Transactions    <BR>    </B></FONT></P>

<P><FONT SIZE=2>None
</FONT></P>

<P><FONT SIZE=2>The
Charter of the Audit Committee provides that it is the responsibility of the Audit Committee to review and approve any transaction between the Company and its officers, directors and 5%
shareholders. </FONT></P>

<P><FONT SIZE=2><B>Compensation of Directors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's compensation program for non-employee directors consists of two elements of compensation: meeting fees and restricted stock awards. Each
non-employee director is entitled to a fee of $1,000 for each Board meeting attended. Each non-employee director also receives an award of restricted stock pursuant to the
Company's 2003 Restricted Stock Plan for non-employee directors, which was approved by shareholders at the Company's February&nbsp;26, 2004 Annual Meeting of Shareholders. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
fiscal year 2005, the Company has granted an annual award of restricted stock to each non-employee director with a value of $40,000 based on the closing price of the
Company's stock on the first business day of the fiscal year. The Company's common stock closed at $14.43 per share on October&nbsp;1, 2006 and accordingly, each non-employee director in
the table below received a grant of 2,772 shares of restricted stock for fiscal year 2007. Each restricted stock award vests quarterly during the fiscal year provided the director continues to serve
on the Board through each applicable vesting date. Mr.&nbsp;Wilson, who served as a non-employee director for a portion of the fiscal year, also received a restricted stock award in
connection with such service, which is reported in the Executive Compensation section of this proxy statement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, all directors are reimbursed for reasonable travel and lodging expenses actually incurred in connection with required attendance at Board&nbsp;meetings. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="20%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fees Earned<BR>
or Paid<BR>
in Cash<BR>
($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Stock<BR>
Awards<BR>
($)(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Option<BR>
Awards<BR>
($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Non-Equity<BR>
Incentive Plan<BR>
Compensation<BR>
($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Change in<BR>
Pension<BR>
Value and<BR>
Nonqualified<BR>
Deferred<BR>
Compensation<BR>
Earnings</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>All Other<BR>
Compensation<BR>
($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total<BR>
($)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=2>Glen R. Bressner</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>40,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>46,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=2>Winston J. Churchill</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>40,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>46,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=2>Ivan M. Marks</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>40,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>46,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=2>Robert E. Mittelstaedt, Jr.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>40,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>46,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=2>Robert H. Rau</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>40,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>46,000</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>This
amount represents the compensation cost recognized for financial reporting purposes by the Company in accordance with the valuation guidelines of Statement of Financial
Accounting Standard 123-R, "Share Based Payment", (FAS&nbsp;123R) with respect to restricted stock granted to each non-employee director. See also Note&nbsp;3, under the heading
"Stock-Based Compensation," to the Company's audited financial statements as filed in the Company's Annual Report on Form&nbsp;10-K for&nbsp;the fiscal year ended September&nbsp;30,
2007, which sets forth the material assumptions used in determining the compensation cost to the Company with respect to such awards. Because each director's restricted stock grant vests, if at all,
during the fiscal year, none of the directors held any unvested restricted stock as of the close of the fiscal year. In addition, as of the close of the fiscal year, none of the
non-employee directors held outstanding options to purchase stock of the&nbsp;Company. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P><FONT SIZE=2><A
NAME="page_de42101_1_13"> </A> </FONT></P>

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<P><FONT SIZE=2><B>Code of Ethics  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We adopted a Code of Ethics (the "Code of Ethics") applicable to our Directors, our principal executive officer and principal financial and accounting officer and
persons performing similar functions. In addition, the Code of Ethics applies to our employees, officers, agents and representatives. The Code of Ethics is posted on the Company's website, </FONT> <FONT SIZE=2><I>www.innovative-ss.com</I></FONT><FONT
SIZE=2>, under the heading Investor Relations. </FONT></P>

<P><FONT SIZE=2><B>Executive Officers  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is a table identifying our current executive officers who are not identified in the tables above. Biographical information for Mr.&nbsp;Wilson
is set forth&nbsp;above. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="26%" ALIGN="CENTER"><FONT SIZE=1><B>Position with the Company</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Roman G. Ptakowski</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>59</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>President</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>John C. Long</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>43</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>Chief&nbsp;Financial&nbsp;Officer</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Roman G. Ptakowski.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Ptakowski has been our President since March 2003. Prior to that, Mr.&nbsp;Ptakowski served
as a Group Vice President and General Manager at B/E Aerospace,&nbsp;Inc. Previously, Mr.&nbsp;Ptakowski was General Manager, Protective Relay Division of the ASEA Brown Bovari Power T&amp;D
Company,&nbsp;Inc. Mr.&nbsp;Ptakowski received a B.S. in Electrical Engineering from New York University and a MBA from Duke University. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;John&nbsp;C. Long.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Long has been our Chief Financial Officer since January&nbsp;2008. Prior to joining the
Company, Mr.&nbsp;Long served in a variety of positions with Arrow International,&nbsp;Inc., including as Vice President from January, 2003 to January, 2008 as Treasurer from January, 2003 to
October, 2007, as Secretary from April, 2004 to October, 2007 and as Assistant Treasurer from 1995 to January&nbsp;2003. Prior to joining Arrow International, Mr.&nbsp;Long served as Controller
for the Jaindl Companies, a group of privately held companies involved in agribusiness and real estate development, from 1989 to 1995. From 1986 to 1989, Mr.&nbsp;Long was employed in the Allentown,
Pennsylvania office of the accounting firm, Concannon, Gallagher, Miller&nbsp;&amp; Co. Mr.&nbsp;Long also serves as a director and Audit Committee Chairman of D&amp;E Communications,&nbsp;Inc., an
integrated communications provider. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de42101_2008_stock-based_incentive_com__20002421"> </A>
<A NAME="toc_de42101_1"> </A>
<BR></FONT><FONT SIZE=2><B>2008 Stock-Based Incentive Compensation Plan<BR>  <BR>    (Item&nbsp;2 on the Proxy Card)    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;25, 2008 the Board adopted the Innovative Solutions&nbsp;and Support,&nbsp;Inc. 2008 Stock-Based Incentive Compensation Plan (the "2008
Plan"). The 2008 Plan shall be effective upon its approval by the Company's shareholders. A copy of the 2008 Plan is attached as Appendix&nbsp;A and&nbsp;the following description is qualified in
its entirety by reference to the full 2008 Plan. Model grant agreements (nonqualified Options, incentive stock Options, and Restricted Stock) are attached as Appendix&nbsp;B. Capitalized terms not
otherwise defined in this summary have the meanings given to them in the 2008&nbsp;Plan. </FONT></P>

<P><FONT SIZE=2><B>General  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The general purpose of the 2008 Plan is to attract and retain valued employees, consultants and directors by offering them a greater stake in the success of
Innovative Solutions&nbsp;and Support,&nbsp;Inc. (the "Company"), and to encourage ownership of Company stock by those employees, consultants and&nbsp;directors. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

<HR NOSHADE>
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<A NAME="page_de42101_1_14"> </A>

<P><FONT SIZE=2><B>Summary of the 2008 Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 2008 Plan will authorize the grant of Stock Appreciation Rights ("SARs"), Restricted Stock, Options and other equity-based awards under the 2008 Plan
(collectively referred to as "Awards"). Options granted under the 2008 Plan may be either "incentive stock options" as defined in section&nbsp;422 of the Internal Revenue Code (the "Code"), or
nonqualified stock options, as determined by the Compensation Committee of the Company's Board of Directors (the "Committee"). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to an adjustment necessary upon a stock dividend, recapitalization, forward split or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or
share exchange, extraordinary or unusual cash distribution or other similar corporate transaction or event, the maximum number of shares of Common Stock available for Awards under the 2008 Plan shall
be the number of shares of Common Stock that were reserved under the Innovations Solutions and Support, Inc. 1998 Stock Option Plan (the "1998 Plan") but which, as of the effective date of the 2008
Plan are not subject to grants under the 1998 Plan (1,686,319 shares as of January&nbsp;1, 2008), increased by any shares of Common Stock that are subsequently forfeited, cancelled or expire
unexercised under the terms of the 1998 Plan. In addition, the Plan provides that no more than 1,500,000 shares of Common Stock may be issued as Options intended to qualify as incentive stock options
and no more than 1,500,000 shares may be awarded to any employee as a performance-based Award under Section&nbsp;162(m) of the Code. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any Award is forfeited, or if any Option terminates, expires or lapses without being exercised, shares of Common Stock subject to such Award will again be available for future grant.
In addition, if there is any change in the Company's corporate capitalization, the Committee shall, as it determines appropriate, adjust the number and kind of shares of Common Stock which may be
issued in connection with future Awards, the number and kind of shares of Common Stock covered by Awards then outstanding under the 2008 Plan, the number and kind of shares of Common Stock available
under the 2008 Plan, the exercise or grant price of any Award, or may make provision for a cash payment with respect to any outstanding Award, provided that no adjustment may be made that would
adversely affect the status of any Award that is intended to be a performance-based Award under Section&nbsp;162(m) of the Code, unless otherwise determined by the Committee. In addition, the
Committee may make adjustments in the terms and conditions of any Awards, including any performance goals, in recognition of unusual or nonrecurring events affecting the Company or any subsidiary, or
in response to changes in applicable laws, regulations or accounting principles, provided that no adjustment may be made that would adversely affect the status of any Award that is intended to be a
performance-based Award under Section&nbsp;162(m) of the Code, unless otherwise determined by the&nbsp;Committee. </FONT></P>

<P><FONT SIZE=2><B>Administration  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 2008 Plan is administered by the Committee or, with respect to non-employee directors, by the Board of Directors of the Company (the "Board").
Subject to the provisions of the 2008 Plan, the Committee (or the Board) has the authority&nbsp;to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>select
the participants who will receive Awards under the 2008 Plan, the type of Awards to be granted, the number of shares subject to Awards and the terms and conditions of
Awards, and all other matters to be determined in connection with an&nbsp;Award;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>determine
whether, and to what extent, and under what circumstances an Award may be cancelled, forfeited or&nbsp;surrendered;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>determine
whether participants have met applicable performance goals under an&nbsp;Award; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>correct
any defect or supply any omission or reconcile any inconsistency in the 2008 Plan, and adopt, amend and rescind rules and regulations relating to the
2008&nbsp;Plan;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>construe
and interpret the 2008 Plan and make all other determinations it deems necessary or advisable for the administration of the 2008 Plan;&nbsp;and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>The
Committee may also delegate all or a portion of its responsibility to one or more of its members, one or more of the officers of the Company, or to a secondary committee
made up of one or more Board members, however, only the Committee may grant Awards to participants subject to Rule&nbsp;16b-3 of the Exchange Act or Section&nbsp;162(m) of
the&nbsp;Code. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2><B>Eligibility  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All employees, individual consultants and directors are eligible to participate in the 2008 Plan. However, only employees, consultants and directors who are
selected by the Committee will receive Awards under the 2008&nbsp;Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Award granted under the 2008 Plan will be evidenced by a written Award agreement between the participant and the Company describing the Award and the terms and conditions to which
the Award is subject. The principal terms and conditions of each type of Award are described below. </FONT></P>

<P><FONT SIZE=2><B>Types of Awards under the 2008 Plan  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Options.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;An Option is a right to purchase shares of Common Stock for a specified period of time at a fixed price (the
"exercise price"). An Option may be either an "incentive stock option," satisfying the requirements of Section&nbsp;422 of the Code, or a non-qualified stock option, as determined by the
Committee. Incentive stock options may not be granted to non-employee directors or consultants. Each option agreement will specify the number of shares which may be purchased pursuant to
the Option, the exercise price, the term of the Option, and the date or dates on which the Option will become exercisable and the terms and conditions under which the Option may be&nbsp;exercised. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
exercise price will be determined by the Committee, but will not be less than the fair market value of a share of Common Stock on the date of grant (110% of the fair market value on
the date of grant in the case of an incentive stock option granted to a ten percent shareholder). The term of the Option will be no more than 10&nbsp;years (five years in the case of an incentive
stock option granted to a ten percent shareholder). Payment for shares issued upon exercise of an Option must be made within three days of the date of exercise. The option agreement will specify
whether the exercise price may be paid in cash; with shares of Common Stock; with any combination of cash and shares of Common Stock; or through a broker with the proceeds of the sale of shares
purchased through the exercise of the option (a "cashless exercise"). </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SARs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;An SAR is a right to receive the excess of (i)&nbsp;the fair market value of one share of Common Stock on the date of
exercise over (ii)&nbsp;the grant price of the SAR as determined by the Committee, but which can never be less than the fair market value of a share of Common Stock on the date of grant. Each SAR
agreement shall specify the number of SARs granted, the date on which the SAR will become exercisable, the method of exercise, the method of settlement, the method by which Common
Stock will be delivered or deemed to be delivered to the participant and any other terms and conditions of any&nbsp;SAR. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted Stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;An Award of Restricted Stock is a grant to the participant of a specified number of shares of Common Stock,
which are subject to forfeiture upon the happening of certain specified events and/or the failure to achieve specified performance goals during the restriction period. An </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

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<BR>

<P><FONT SIZE=2>Award
of Restricted Stock will be evidenced by a Restricted Stock agreement that will specify the duration of the restriction period, any transfer restrictions, the performance, employment or other
conditions under which the Restricted Stock may be forfeited and the amount, if any, the participant must pay to receive the Restricted Stock. Unless otherwise provided in the Award agreement, during
the restriction period, the participant has the right to receive dividends from, and to vote, the shares of Restricted Stock. If not previously forfeited, at the end of the restriction period, the
forfeiture conditions will lapse and the unrestricted shares will be delivered to the participant. A Restricted Stock agreement may, but is not required to, provide for a tax reimbursement cash
payment to be made by the Company to any participant in connection with the tax consequences of an Award or payment by a participant of any taxes related to an&nbsp;Award. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performance-Based Awards.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Performance-based Awards are certain Awards which are based on the attainment of specified
performance goals. A performance-based Award will vest and become payable to and/or exercisable by the participant upon achievement during a specified performance period of performance goals
established by the Committee. Performance goals may be established on a Company-wide basis, or with respect to any subsidiary or business unit of the&nbsp;Company. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the case of performance-based Awards which are intended to satisfy Code Section&nbsp;162(m) of the Code and which are granted to participants who are "covered employees" under
Section&nbsp;162(m) of the Code, the applicable performance goals are limited to one or more of the&nbsp;following: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>return
on capital, equity or assets by the Company, a division or subsidiary;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>earnings
measures and ratios (including diluted earnings per share, total earnings, operating earnings, earnings growth, earnings before interest and taxes, and earnings
before interest, taxes, depreciation and amortization);
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>net
economic profit;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>net
income;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>operating
income;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>sales
or sales growth;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>gross
margin or direct margin;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>share
price;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>operating
profit;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>per
period or cumulative cash flow or cash flow returns on investment;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>inventory
turns;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>financial
return ratios;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>market
share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>balance
sheet measurements such as receivable turnover;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>improvement
in or attainment of expense levels;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>maintenance
or improvement of working capital levels;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>debt
reduction; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>strategic
innovation;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>customer
or employee satisfaction;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>individual
objectives; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
other financial or other measurement deemed appropriate by the Committee, as it relates to the results of operations or other measurable progress of the Company, its
subsidiaries, or any business unit&nbsp;thereof. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performance
goals may be expressed in absolute or relative terms and may be based on comparisons with a group of peer companies or by a financial market index. In addition, with respect
to Awards that are not intended to qualify as "performance-based" under Section&nbsp;162(m) of the Code, performance goals may include any other goal that the Committee determines to
be&nbsp;appropriate. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Stock-Based Awards.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Committee may, subject to applicable law, grant to a participant any type of Award other than
an Award of Options, SARs, or Restricted Stock that is payable in or valued
by reference to shares of Common Stock, and that is deemed by the Committee to be consistent with the purposes of the 2008 Plan. A stock-based Award may include Awards granted in substitution for any
other right of a participant to receive payment of compensation from the Company or a&nbsp;subsidiary. </FONT></P>


<P><FONT SIZE=2><B>Change in Control  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise provided in an Award agreement, upon a Change in Control (defined below), the Committee may take one or more of the following actions:
(i)&nbsp;accelerate the vesting and exercisability of all Options or SARs and fully vest all Restricted Stock; (ii)&nbsp;cancel any outstanding vested Options or SARs in exchange for a cash
payment in an amount equal to the excess of the fair market value of the Common Stock underlying the unexercised portion of the Option or SAR as of the date of the Change in Control over the exercise
price of such portion; (iii)&nbsp;terminate any or all of the participant's outstanding Options or SARs immediately prior to the Change in Control, provided that the Company gives the participant an
opportunity to exercise the Options or SARs within a specified period of time; (iv)&nbsp;where the Company is not the surviving corporation, cause the surviving corporation to assume all outstanding
Awards or replace all outstanding Awards with comparable Awards; or take any other action that it deems appropriate. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
"Change in Control" is defined in the 2008 Plan as, unless otherwise provided in an Award agreement: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
acquisition in one or more transactions during any 12-month period by any "person" (as such term is used for purposes of section&nbsp;13(d) or
section&nbsp;14(d) of the Exchange Act) but excluding, for this purpose, the Company or its Subsidiaries or any employee benefit plan of the Company or its Subsidiaries, of "beneficial ownership"
(within the meaning of Rule&nbsp;13d-3 under the Exchange Act) of thirty percent (30%) or more of the combined voting power of the Company's then outstanding voting securities (the
"Voting Securities");
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
date at least a majority of the individuals who, as of the effective date of the 2008 Plan, constitute the Board (the "Incumbent Board") is replaced during any
12-month period;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
consummation of a merger or consolidation involving the Company if the Shareholders of the Company, immediately before such merger or consolidation, do not own, directly
or indirectly, immediately following such merger or consolidation, more than seventy percent (70%) </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

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<UL>
<UL>

<P><FONT SIZE=2>of
the combined voting power of the outstanding Voting Securities of the corporation resulting from such merger or consolidation;&nbsp;or </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>a
complete liquidation or dissolution of the Company or a sale or other disposition of all or substantially all of the assets of the&nbsp;Company. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Effective Date, Amendments, and Termination  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 2008 Plan will be effective as of the date of approval by the Company's shareholders. The 2008 Plan will terminate on the tenth anniversary of the effective
date, unless earlier terminated by the Board. Termination will not affect Awards outstanding at the time of termination. The Board may amend, alter, suspend, discontinue or terminate the 2008 Plan
without shareholder approval, provided that shareholder approval is required for any amendment which (i)&nbsp;would increase the number of shares subject to the 2008 Plan; (ii)&nbsp;would decrease
the price at which Awards may be granted, or (iii)&nbsp;would require shareholder approval by law, regulation, or the rules of any stock exchange or automated quotation system. The Committee may
amend or terminate any outstanding Award and any Award agreement without a participant's consent, provided the amendment does not materially and adversely impact the participant (unless necessary to
ensure a deduction under Section&nbsp;162(m) of the Code). The Committee may also substitute an Award for another type of Award provided that the terms and economic benefit of the substituted Award
are at least equivalent to the terms and the economic benefit of the Award being replaced. However, any performance condition specified in connection with an Award shall remain subject to adjustment
by the Committee, except to the extent such adjustment will affect the status of an Award as "performance-based compensation" under Section&nbsp;162(m) of the&nbsp;Code. </FONT></P>


<P><FONT SIZE=2><B>New Plan Benefits  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There have been no grants made under the 2008 Plan. Employees, consultants and directors who will participate in the 2008 Plan in the future, and the amounts of
their Awards, will be determined by the Committee subject to the restrictions outlined above. The amount of shares subject to these Awards has not yet been determined. As no additional determinations
have yet been made, it is not possible to state the terms of any individual Awards which may be issued under the 2008 Plan or the names or
positions of, or respective amounts payable or allocable to any participants in the 2008 Plan, other than as provided in this&nbsp;summary. </FONT></P>


<P><FONT SIZE=2><B>Certain Federal Income Tax Consequences  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion is a summary of certain federal income tax considerations that may be relevant to participants under the 2008 Plan. The discussion is for
general informational purposes only and does not purport to address specific federal income tax considerations that may apply to a participant based on his or her particular circumstances, nor does it
address state or local income tax or other considerations that may be relevant to a&nbsp;participant. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incentive Stock Options.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In general, neither the grant nor the exercise of an incentive stock option results in taxable
income to an option holder or a deduction to the Company. If the option holder holds the stock received upon exercise for at least two years from date of grant and one year after the date of exercise,
then the gain realized on disposition of the stock is treated as a long-term capital gain, and the Company will not be entitled to a deduction. If, however, the shares are disposed of
prior to the completion of this period (a "disqualifying disposition"), then the option holder will include as compensation income for the year of the disposition, an amount equal to the excess of the
fair market value of the shares upon exercise over the exercise price of the option, or if less, the excess of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

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<BR>

<P><FONT SIZE=2>amount
realized upon disposition over the exercise price. The Company will be entitled to a corresponding deduction at that time. Any proceeds in excess of the fair market value of the shares on the
date of exercise will be treated as short-term or long-term capital gain, depending upon whether the shares have been held for more than one year. If the sales price is less
than the exercise price of the option, this amount will be treated as a short-term or long-term capital loss, depending on whether the shares have been held for more than
one&nbsp;year. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the 2008 Plan, incentive stock options may, if permitted by the Committee, be exercised in whole or in part with shares of Common Stock held by the option holder. Such an exercise
will be treated as a tax-free exchange of the shares of Common Stock surrendered (assuming the surrender of the previously-owned shares does not constitute a disqualifying disposition of
those shares) for an equivalent number of shares of Common Stock received, and the equivalent number of shares will have a tax basis equal to the tax basis of the surrendered shares. Shares of Common
Stock received in excess of the number of shares surrendered will have a tax basis of&nbsp;zero. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-Qualified Stock Options.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A non-qualified stock option results in no taxable income to the option
holder or deduction to the Company at the time it is granted. An option holder will recognize compensation income at the time a non-qualified stock option is
exercised in an amount equal to the excess of the fair market value of the underlying shares on the exercise date over the exercise price. The Company will generally be entitled to a deduction for
federal income tax purposes in the same amount as the amount included in compensation income by the option holder. Gain or loss on a subsequent sale or other disposition of the shares acquired upon
the exercise of a non-qualified stock option will be measured by the difference between the amount realized on the disposition and the tax basis of such shares, and will be
short-term or long-term capital gain depending on whether the shares have been held for more than one year. The tax basis of the shares acquired upon the exercise of any
non-qualified stock option will be equal to the sum of the exercise price and the amount included in income with respect to such&nbsp;option. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the 2008 Plan, non-qualified options may, if permitted by the Committee, be exercised in whole or in part with shares of Common Stock held by the option holder. Such an
exercise will be treated as a tax-free exchange of the shares of Common Stock surrendered for an equivalent number of share of Common Stock received, and the equivalent number of shares
will have a tax basis equal to the tax basis of the surrendered shares. Shares of Common Stock received in excess of the number of shares surrendered will have a tax basis of&nbsp;zero. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock Appreciation Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A recipient realizes no taxable income when an SAR is granted. Upon exercising an SAR, a recipient
will realize ordinary income in an amount equal to the cash or value of the shares received. Generally, there will be no federal income tax deduction allowed to the Company upon the grant or
termination of SARs. However, upon exercise of a SAR, the Company will be entitled to a deduction equal to the amount of ordinary income the recipient is required to recognize as a result of
the&nbsp;exercise. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted Stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Restricted stock received pursuant to Awards, including performance-based Awards, will be considered
subject to a substantial risk of forfeiture for federal income tax purposes. If a holder of restricted stock does not make the election described below, the holder realizes no taxable income upon the
receipt of restricted stock and the Company is not entitled to a deduction at such time. When the forfeiture restrictions applicable to the restricted stock lapse, the holder will realize compensation
income equal to the fair market value of the shares at that time, less any amount paid for the shares, and the Company will be entitled to a corresponding deduction. A holder's tax basis in restricted
stock will be equal to the fair market value when the forfeiture restrictions lapse, and the holding period for such shares will begin at that time. Upon a subsequent sale of the shares, the holder
will realize short-term or long-term gain or loss, depending on whether the shares have been held for </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

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<BR>

<P><FONT SIZE=2>more
than one year at the time of sale. Such gain or loss will be equal to the difference between the amount realized upon the sale of the shares and the holder's tax basis in the shares. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Individuals
receiving shares of restricted stock may make an election under Section&nbsp;83(b) of the Code with respect to the shares. By making a Section&nbsp;83(b) election, the
restricted stock holder elects to realize compensation income with respect to the shares when the restricted stock is granted rather than
at the time the forfeiture restrictions lapse. The amount of such compensation income will be equal to the fair market value of the shares when the holder receives them (valued without taking the
restrictions into account), less any amount paid for the shares, and the Company will be entitled to a corresponding deduction at that time. By making a Section&nbsp;83(b) election, the holder will
realize no additional compensation income with respect to the shares when the forfeiture restrictions lapse, and will instead recognize gain or loss with respect to the shares when they are sold. The
holder's tax basis in the shares with respect to which a Section&nbsp;83(b) election is made will be equal to their fair market value when received by the holder, and the holding period for such
shares begins at that time. If, however, the shares are subsequently forfeited, the holder will not be entitled to claim a loss with respect to the shares to the extent of the income realized by the
holder upon the making of the Section&nbsp;83(b) election. To make a Section&nbsp;83(b) election, a holder must file an appropriate form of election with the Internal Revenue Service and with the
Company, each within 30&nbsp;days after shares of restricted stock are received, and the holder must also attach a copy of his or her election to his or her federal income tax return for the year in
which the shares are&nbsp;received. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
general, during the restriction period, dividends and distributions paid with respect to restricted stock will be treated as compensation income (not dividend income) received by the
holder. Dividend payments received with respect to shares of restricted stock for which a Section&nbsp;83(b) election has been made generally will be treated as dividend income. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Withholding.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Company is entitled to deduct from the payment of any Award all applicable income and employment taxes
required by federal state or local law to be withheld, or to take such other action as the Committee may deem advisable to enable the Company or any subsidiary and participants to satisfy tax
obligations relating to any&nbsp;Award. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;162(m) Limitations.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;162(m) of the Code limits the deductibility of compensation paid to certain
executive officers, unless the compensation is "performance-based compensation" and meets certain other requirements outlined in Code Section&nbsp;162(m) and&nbsp;related regulations. Under the
2008 Plan, the Committee may in its discretion grant Awards that are intended to qualify as performance-based compensation. </FONT></P>

<P><FONT SIZE=2><B>The Board unanimously recommends a vote FOR the adoption of the 2008 Plan.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

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<A NAME="toc_dg42101_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXECUTIVE COMPENSATION<BR>  <BR>    Compensation Discussion and Analysis    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Objective of Compensation Policy  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The objective of the Company's compensation policy is to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>attract
and retain exceptional individuals as executive officers; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>provide
key executives with motivation to perform to the full extent of their abilities to maximize the performance of the Company and deliver enhanced value to the
Company's shareholders. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>What Our Compensation Program is Designed to Reward  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Overall, our compensation program is designed to reward the contributions of each individual executive officer to shareholder value and to provide sufficient
incentives to executive officers to ensure their dedication to the Company. As discussed further below, the Company seeks to achieve these goals by providing sufficient base salaries to compensate
executives for their day-to-day performance of their duties for the Company, awarding cash bonuses when the Company's financial performance is strong and granting equity-based
awards, from time to time, when the Company believes such equity awards will align the interests of named executive officers with those of the Company's shareholders and provide an additional
incentive to executive officers to contribute to the Company's financial and strategic performance. </FONT></P>

<P><FONT SIZE=2><B>General Compensation Policies  </B></FONT></P>

<UL>

<P><FONT SIZE=2><I> Process for Setting Total Compensation  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, upon hiring or promoting a named executive officer, the Compensation Committee sets base salary and other compensation on the basis of subjective
factors, including experience, individual achievements, level of responsibility assumed at the Company and may consider market compensation practices from time to time. Actual base salaries, cash
bonuses, and equity-based awards for each named executive officer may be adjusted from year to year based upon each named executive officer's annual review and progress toward or attainment of
personal and corporate goals and objectives, including Company financial performance, shareholder return and such other factors as the Compensation Committee deems appropriate and in the best
interests of our shareholders. For fiscal year 2007, however, there were no adjustments to the base salaries of any of the named executive officers from the prior fiscal&nbsp;year. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Compensation Committee seeks recommendations from the Chairman and Chief Executive Officer regarding changes to or increases in elements of compensation for named executive officers.
In addition, our Chairman and Chief Executive Officer are principally responsible for reviewing each other named executive officer's performance and making recommendations for the Company's
compensation package for such officers for the following fiscal year. The Compensation Committee independently reviews the performance of the Company's Chairman and Chief Executive Officer. The
Compensation Committee reviews the recommendations of the Chairman and Chief Executive Officer carefully in light of their proximity to the other executives and knowledge of their contributions to and
goals for continuing achievement with the&nbsp;Company. </FONT></P>

<P><FONT SIZE=2><B>Elements of Compensation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our compensation program for named executive officers consists of the following elements of compensation, each described in greater depth&nbsp;below: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Base
Salaries.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Annual
Bonuses. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>

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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Equity-based
Compensation.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Severance,
Termination and Change in Control Benefits.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Perquisites.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>General
Benefits. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
fiscal year 2007, the substantial majority of each named executive officer's compensation consisted of annual base salary. No discretionary bonuses were paid and, except for an award
of restricted stock to Mr.&nbsp;Wilson in his capacity as a non-employee director (prior to the commencement of his employment with the Company), no equity-based awards were made to
named executive officers in fiscal year 2007. The Company provides few personal benefits to named executive officers. The Company may, in hiring or promoting a named executive officer, negotiate a
potential severance benefit as a recruitment mechanism and to provide such named executive officer with a measure of income security when beginning a new position, however none of the named executive
officers were entitled to any such benefits during the 2007 fiscal year. In addition, the Company's equity awards typically vest in full or become fully exercisable upon a change in control. The
Company does not typically provide for severance or change in control benefits because the Company believes that each named executive officer's total compensation provides sufficient basis for our
executives' long range planning and retirement savings. However, in negotiating the terms of Mr.&nbsp;Wilson's employment with the Company, the Company determined that it was necessary to provide a
potential severance benefit in order to ensure Mr.&nbsp;Wilson's commitment to the Company. Finally, named executive officers participate in the Company's 401(k) savings plan and health and benefit
plans and are entitled to vacation and paid time off based on the Company's general vacation policies. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Base Salary  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company pays base salaries to named executive officers because the Company believes salaries are essential to recruiting and retaining qualified executives.
In addition, because base salaries are subject to increase based on each named executive officer's performance for the Company, base salaries also create an incentive for named executive officers to
make meaningful contributions to the Company's success. Base salaries are initially set by the Compensation Committee upon hiring or promoting a named executive officer, and may be incorporated into
employment contracts entered into with our named executive officers. Base salary levels are set based on the named executive officer's previous experience and employment, as well as the named
executive officer's expected duties and obligations to the Company. Thereafter, the Compensation Committee may increase a named executive officer's base salary each year based on the results of each
named executive officer's annual review (conducted by the Chairman or Chief Executive Officer for each of the other named executive officers and by the Compensation Committee for the Chief Executive
Officer) and based on the Compensation Committee's subjective assessment of our overall performance over the preceding&nbsp;year. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
named executive officer's annual review is a subjective process whereby the Chairman, Chief Executive Officer or Compensation Committee evaluates each named executive officer's
contributions toward the development and execution of strategic plans, leadership skills and motivation and involvement in industry groups. The weight given such factors by the Compensation Committee
may vary from one named executive officer to&nbsp;another. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
fiscal year 2007, the Company did not increase the base salary of any of the named executive officers from the levels in effect for fiscal year 2006. The Company did not believe that
a base salary increase would be appropriate given the Company's financial performance for fiscal year&nbsp;2006. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, and in considering the appropriate compensation to be paid to Mr.&nbsp;Wilson, the Compensation Committee determined that for the balance of fiscal year 2007 and fiscal
year 2008, Mr.&nbsp;Wilson would be entitled to an initial annual base salary of $400,000 per year. Mr.&nbsp;Wilson commenced employment with the Company in June 2007 as the Chief Executive
Officer, Designate, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P>

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<P><FONT SIZE=2>and
was officially named Chief Executive Officer on November&nbsp;30, 2007. The Compensation Committee determined that a base salary of $400,000 per year is appropriate for Mr.&nbsp;Wilson because
it represents the same base salary paid to the Company's Chief Executive Officer for fiscal year&nbsp;2007. Mr.&nbsp;Wilson's employment agreement and option agreement, dated January&nbsp;21,
2008, are described below under the heading "Fiscal Year 2008 Compensation." </FONT></P>

<UL>

<P><FONT SIZE=2><I> Annual Bonus Compensation  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company may, from time to time, award annual bonuses, in its discretion, to the named executive officers and may agree, in hiring or promoting a named
executive officer, to a target bonus opportunity, expressed as a percentage of base salary, to be paid if the Company determines that the Company's financial performance goals or other objectives are
attained. None of the named executive officers were, during fiscal year 2007, entitled to any bonus under the terms of any written employment agreement or other agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
required under the terms of a contract with a named executive officer (none were in effect for fiscal year 2007), the Company has historically only awarded discretionary bonuses
when the Company's financial performance has met or exceeded budgeted goals established by the Board. Because the Company's financial performance for fiscal year 2007 did not meet the Board's
expectations, no discretionary bonuses were paid to named executive officers for fiscal year 2007. The Compensation Committee relies on the Chairman's and Chief Executive Officer's recommendations
regarding whether discretionary bonuses should be paid to the other named executive officers (and other Company employees) and independently determines whether any discretionary bonus should be paid
to the Chairman or Chief Executive Officer. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
the Chairman and Chief Executive Officer has historically determined whether and how much cash bonus to pay each named executive officer based on a discretionary review of
Company financial performance, named executive officers' bonuses for prior fiscal years were not considered to be "performance based" under Section&nbsp;162(m) of the Internal Revenue Code.
Accordingly, the Company would not have been entitled to deduct, on its corporate tax return, all of a named executive officer's base salary and bonus if the total amount of such base salary and bonus
(and other compensation considered under Section&nbsp;162(m) of the Code) exceeded $1,000,000 in that fiscal year. However, the Company has not paid any annual discretionary bonuses that have
resulted in the Company's loss of deduction, nor does the Company anticipate paying such high bonuses to its named executive officers. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Equity Compensation  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has in prior fiscal years awarded equity-based compensation to our named executive officers in order to provide a link between the
long-term results achieved for our shareholders and the rewards provided to named executive officers, thereby ensuring that such officers have a continuing stake in our
long-term success. Equity-based compensation has historically been paid to named executive officers in the form of stock options. Such awards are made at the discretion of the Compensation
Committee and are not timed or coordinated with the release of material, non-public information. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company did not award any stock options to named executive officers in fiscal year 2007. In addition, with the exception of Mr.&nbsp;Reilly, all of the outstanding stock options
granted to named executive officers became fully vested and exercisable prior to fiscal year 2007. The compensation expense recognized by the Company in connection with Mr.&nbsp;Reilly's stock
options that vested in fiscal year 2007 are reported in the "Option Awards" column of the Summary Compensation Table&nbsp;below. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
Mr.&nbsp;Wilson was appointed as a non-employee director of the Board on February&nbsp;9, 2007, he received a grant of restricted stock for his service as a
non-employee director. Mr.&nbsp;Wilson's grant </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>23</FONT></P>

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<BR>

<P><FONT SIZE=2>was
pro-rated in order to properly compensate him for the portion of the fiscal year during which it was expected he would serve as a non-employee director. Accordingly,
Mr.&nbsp;Wilson received a restricted stock grant representing 50% of the shares granted to each other non-employee director. The Board determined that Mr.&nbsp;Wilson's restricted
stock award would vest in 50% increments on the first day of each of the two fiscal quarters thereafter, subject to Mr.&nbsp;Wilson's continued service with the&nbsp;Company. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Severance, Termination and Change in Control Benefits  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the Company does not typically provide for separate severance, termination or change in control benefits, the Company has previously negotiated such
benefits when hiring or promoting a named executive officer. For example, upon hiring Mr.&nbsp;Ptakowski in 2003, the Company entered into an employment agreement with Mr.&nbsp;Ptakowski which
provided for severance payments upon termination of employment in certain circumstances, including termination following a change in control. Mr.&nbsp;Ptakowski's employment agreement expired in
March 2005 and the Company has no further contractual obligations relating to Mr.&nbsp;Ptakowski's employment, other than to provide him with 90-days notice prior to termination of
his&nbsp;employment. In addition, in negotiating Mr.&nbsp;Wilson's employment agreement, the Company agreed to a potential severance benefit for Mr.&nbsp;Wilson, as described below under the
heading "Fiscal Year 2008 Compensation." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Grants
of Company stock options to named executive officers typically vest or become fully exercisable upon a change in control of the Company. The Company believes that such accelerated
vesting is essential to maintaining the commitment and dedication of its key employees throughout a potential change in control scenario. Accordingly, as described under the heading "Potential
Payments Upon Termination or Change in Control," below, Mr.&nbsp;Reilly's unvested stock options would vest in full upon a change in control of the&nbsp;Company. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Perquisites  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal year 2007, we provided certain personal benefits to our Chief Executive Officer and Chief Executive Officer, Designate, as summarized below. The
aggregate incremental cost to the Company of the perquisites received by each of the named executive officers in 2007 did not exceed $10,000 and accordingly, such benefits are not included in the
Summary Compensation Table&nbsp;below. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Automobile.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A company car was available to our Chief Executive Officer for business and personal purposes for a portion of
fiscal year 2007. Upon Mr.&nbsp;Wilson's appointment as Chief Executive Officer, Designate, the Company car previously available to the Chief Executive Officer for business and personal purposes was
available to Mr.&nbsp;Wilson for business and personal purposes. The Company covers the costs of car insurance, upkeep and maintenance for the company&nbsp;car. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aircraft.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Company has, in prior fiscal years, permitted the Company's Chief Executive Officer to use the Company's
corporate aircraft for personal travel. The Company believes that use of the Company's aircraft represents a valuable perquisite for the Chief Executive Officer which is appropriate considering his
value to the Company and that such benefit can be provided by the Company for relatively minimal cost. However, the Company's Chief Executive Officer in fiscal year 2007 did not use the Company's
aircraft for personal reasons, and accordingly, did not receive any personal benefit with respect thereto during the 2007 fiscal&nbsp;year. </FONT></P>

<UL>

<P><FONT SIZE=2><I> General Benefits  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following are standard benefits offered to all eligible Company employees, including named executive officers. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retirement Benefits.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Company maintains a tax-qualified 401(k) savings plan for all of our eligible employees,
including the named executive officers, known as the IS&amp;S 401K Plan (the "Savings </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>24</FONT></P>

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<P><FONT SIZE=2>Plan").
The Savings Plan is a voluntary contributory plan under which employees may elect to defer compensation for federal income tax purposes under Section&nbsp;401(k) of the Internal Revenue Code
of&nbsp;1986. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has not historically made matching contributions to the Savings Plan on behalf of participants and did not make any such contributions in fiscal year 2007. Accordingly, no
amount available to any named executive officer under the Savings Plan is required to be reported or included in the Summary Compensation Table,&nbsp;below. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Medical, Dental, Life Insurance and Disability Coverage.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Active employee benefits such as medical, dental, life insurance and
disability coverage are available to all eligible employees. The value of these benefits is not required to be included in the Summary Compensation Table since they are made available on a
Company-wide basis to all eligible employees. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Paid Time-Off Benefits.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We also provide vacation and other paid holidays to all employees, including the
named executive officers. </FONT></P>

<P><FONT SIZE=2><B>Fiscal Year 2008 Compensation  </B></FONT></P>

<UL>

<P><FONT SIZE=2><I> Appointment of Chief Executive Officer.  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company appointed Mr.&nbsp;Wilson the Company's Chief Executive Officer, Designate, in June 2007. On January&nbsp;21, 2008, the Company entered into an
employment agreement and option agreement with Mr.&nbsp;Wilson. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Wilson's
employment agreement provides for his continued employment through December&nbsp;31, 2009 on the following terms, in addition to participation in the Company's
employee benefit plans and policies: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Base
salary of $400,000 per year, subject to increase annually.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>An
annual bonus of $300,000, if the Company's annual budget is attained and up to $600,000 if the annual budget is exceeded.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Reimbursement
of moving expenses and legal expenses incurred in connection with negotiating Mr.&nbsp;Wilson's employment agreement.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>A
Company-provided leased automobile or, in the Company's discretion, an automobile allowance. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
termination of Mr.&nbsp;Wilson's employment agreement, in addition to accrued but unpaid base salary, bonus, benefits and expense reimbursement, Mr.&nbsp;Wilson may be entitled
to severance payments as follows: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>If
such termination is a result of his disability or death, he (or his estate) would be entitled to receive his base salary (less any payments Mr.&nbsp;Wilson receives
during such period from the Company's short-term disability plan) for a period of six months following such termination and a pro rated bonus for the year of such termination.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>If
such termination is by the Company without cause or by Mr.&nbsp;Wilson for good reason, he would be entitled to receive his base salary for the remainder of the term of
the agreement and a pro rated bonus for the year of such termination, provided he executes and does not revoke a release of claims against the Company. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the term of Mr.&nbsp;Wilson's employment and for a period of 12&nbsp;months thereafter, Mr.&nbsp;Wilson agreed that he will not compete against the Company or its affiliates
and will not solicit any of the Company's or affiliates' employees or customers. In addition, Mr.&nbsp;Wilson has also agreed to </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>25</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>protect
the Company's and its affiliates' confidential information and intellectual property and has agreed not to disparage the Company, its affiliates and their officers, directors and employees. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Wilson's
option agreement provides Mr.&nbsp;Wilson the opportunity to purchase up to 200,000 shares of the Company's common stock at a purchase price of $10.22 per share
(the Company's closing stock price on January&nbsp;18, 2008, the date the Compensation Committee approved the grant to Mr.&nbsp;Wilson).
Mr.&nbsp;Wilson's option agreement is subject to the terms and conditions of the Company's 1998 Stock Option Plan and the following additional terms: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Wilson's
option will vest in 25% increments on June&nbsp;30, 2008, December&nbsp;31, 2008, June&nbsp;30, 2009 and December&nbsp;31, 2009.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>The
option will vest in full upon a Change of Control (as defined in the 1998 Stock Option Plan).
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Wilson
may pay the exercise price in cash, previously acquired shares of the Company's common stock, or by authorizing the Company to retain shares with a
sufficient fair market value to cover the applicable exercisable price. </FONT></DD></DL>


<P><FONT SIZE=2><I> Chief Financial Officer.  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January 2008, Mr.&nbsp;Long replaced Mr.&nbsp;Reilly as the Company's Chief Financial Officer. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company expects that Mr.&nbsp;Long will enter into an employment and stock option agreement that will provide for the payments and benefits described below. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is anticipated that Mr.&nbsp;Long's employment agreement will provide for his continued employment as Chief Financial Officer through January&nbsp;28, 2010 on the following terms
and conditions, in addition to participation in the Company's employee benefit plans and policies: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Initial
base salary of $250,000 per year.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Reimbursement
for reasonable and necessary business expenses. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the Company anticipates that it will offer a potential severance package to Mr.&nbsp;Long in order to secure his employment with the Company. Currently, we expect that
severance obligation to provide for continued base salary and benefits if Mr.&nbsp;Long is terminated without cause for the remainder of the term of the agreement (subject to a minimum of
6&nbsp;months) and a lump sum payment of 100% of his annual base salary if he is terminated in connection with a change in control. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Long
is expected to agree to protect the Company's confidential information and intellectual property and that he will not compete with the Company or solicit the Company's
employees during the term of his employment and for a period thereafter. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is anticipated that Mr.&nbsp;Long will be granted an option to purchase up to 120,000 shares of the Company's common stock at the closing stock price on the date of grant.
Mr.&nbsp;Long's option agreement will be subject to the terms and conditions of the Company's 1998 Stock Option Plan and such additional provisions as are set forth in the written option agreement,
to be entered. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Non-Executive Chairman.  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective upon Mr.&nbsp;Wilson's appointment as Chief Executive Officer on November&nbsp;30, 2007, Mr.&nbsp;Hedrick stepped down from the position of Chief
Executive Officer, but will continue to be involved in leading the Company as its non-executive Chairman. Mr.&nbsp;Hedrick will continue in fiscal year 2008 to receive base compensation
commensurate with his fiscal year 2007 base salary for his duties as non-executive Chairman of the&nbsp;Board. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>26</FONT></P>

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<UL>

<P><FONT SIZE=2><I> Adoption of 2008 Stock Option Plan.  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to continue to be able to make option awards to named executive officers, other employees and non-employee directors of the Company following
the fiscal year 2008 expiration of the Company's 1998 Stock Option Plan, the Board has adopted and is recommending that the shareholders vote in favor of the adoption of the 2008 Stock Option Plan
(the "2008 Plan"), described more fully in Proposal 2 above. </FONT></P>

<P><FONT SIZE=2><B>Deductibility of Compensation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;162(m) of the Internal Revenue Code of 1986, as amended, generally denies a federal income tax deduction for certain compensation exceeding
$1,000,000 paid to the Chief Executive Officer or any of the other named executive officers, excluding, among other things, certain performance-based compensation. Through September&nbsp;30, 2007,
this provision has not affected our tax deductions, and the Compensation Committee believes that, at the present time, it is unlikely that the compensation paid to any of our employees in a taxable
year will exceed $1,000,000. </FONT></P>

<P><FONT SIZE=2><B>Compensation Committee Report  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section of the Company's proxy with management, and based on the
Compensation Committee's review and discussion with management, the Compensation Committee recommended to the Company's Board of Directors that the Compensation Discussion and Analysis section be
included in the Company's proxy statement for fiscal year&nbsp;2007. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Submitted by the Compensation Committee:</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Winston&nbsp;J.
Churchill (Chairman) </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Robert&nbsp;E.
Mittelstaedt,&nbsp;Jr. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>27</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
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<A NAME="toc_di42101_1"> </A>
<BR></FONT><FONT SIZE=2><B>SUMMARY COMPENSATION TABLE    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=20><HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Name and Principal Position<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Year<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Salary ($)<BR> </B></FONT><BR></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Bonus ($)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Stock<BR>
Awards ($)<BR> </B></FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Option<BR>
Awards ($)<BR> </B></FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>All other<BR>
Compensation ($)(1)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total ($)<BR> </B></FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=20><HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Geoffrey S. M. Hedrick,</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>400,000</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>400,000</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>Chief Executive Officer</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=20><HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Raymond J. Wilson,</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>124,077</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>20,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>32,644</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>176,721</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>Chief Executive Officer (designate)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=20><HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Roman G. Ptakowski,</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>250,000</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>250,000</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>President</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=20><HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>James J. Reilly,</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>200,000</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>36,975</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>(5)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>236,975</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>Chief Financial Officer</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=20><HR NOSHADE></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>As
described in the Compensation Discussion and Analysis section above, the Company provided Mr.&nbsp;Hedrick and Mr.&nbsp;Wilson with certain personal benefits (use of a Company
automobile) during fiscal year 2007. The amount of each personal benefit provided to each of Messrs.&nbsp;Hedrick and Wilson did not exceed $10,000, and accordingly, is not reported in the Summary
Compensation Table&nbsp;above.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>The
amount reported as Mr.&nbsp;Wilson's base salary includes $2,000 in directors fees received prior to Mr.&nbsp;Wilson's commencement of employment with the Company as an
executive officer.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Wilson
received a pro-rated award of restricted stock for his service as a non-employee director pursuant to the Company's policies regarding
director compensation (described above under the heading "Director Compensation"). This amount represents the compensation cost recognized for financial reporting purposes by the Company in accordance
with the valuation guidelines of FAS&nbsp;123R with respect to the stock award granted to Mr.&nbsp;Wilson. Additional detail regarding this award is provided below under the "Grants of Plan Based
Awards" table. See also Note&nbsp;3, under the heading "Stock-Based Compensation," to the Company's audited financial statements as filed in the Company's Annual Report on
Form&nbsp;10-K for&nbsp;the fiscal year ended September&nbsp;30, 2007, which sets forth the material assumptions used in determining the compensation cost to the Company with respect
to such&nbsp;awards.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>This
amount represents relocation expenses paid to Mr.&nbsp;Wilson.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>This
amount represents the compensation cost recognized for financial reporting purposes by the Company in accordance with the valuation guidelines of FAS&nbsp;123R with respect to
outstanding options granted to Mr.&nbsp;Reilly. Additional detail regarding outstanding options is provided below under the "Outstanding Equity Awards at Fiscal Year End" table. See also
Note&nbsp;3, under the heading "Stock-Based Compensation," to the Company's audited financial statements as filed in the Company's Annual Report on Form&nbsp;10-K for&nbsp;the fiscal
year ended September&nbsp;30, 2007, which sets forth the material assumptions used in determining the compensation cost to the Company with respect to such&nbsp;awards. </FONT></DD></DL>
<UL>

<P><FONT SIZE=2><I> Additional Information Regarding Summary Compensation Table.  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September&nbsp;30, 2007, none of the named executive officers were parties to employment agreements with the Company, and, accordingly, the amount of each
named executive officer's annual compensation was subject to the Compensation Committee's review and approval, in its discretion, from year to year. As described in the Compensation Discussion and
Analysis section above, the Company has recently finalized an employment agreement with Mr.&nbsp;Wilson. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>28</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=31,EFW="2182035",CP="INNOVATIVE SOLUTIONS AND SUPPORT",DN="1",CHK=233617,FOLIO='28',FILE='DISK127:[08ZAC1.08ZAC42101]DI42101A.;26',USER='SSULLIV',CD='24-JAN-2008;13:13' -->
<A NAME="page_di42101_1_29"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di42101_grants_of_plan-based_awards"> </A>
<A NAME="toc_di42101_2"> </A>
<BR></FONT><FONT SIZE=2><B>GRANTS OF PLAN-BASED AWARDS    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="26%" ALIGN="CENTER"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=12><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="26%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Grant Date<BR> </B></FONT><BR></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>All other Stock<BR>
Awards: Number<BR>
Of Shares<BR>
Of Stock Or Units (#)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>All other Option<BR>
Awards: Number<BR>
Of Securities<BR>
Underlying Options (#)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Exercise<BR>
or Base<BR>
Price of<BR>
Option<BR>
Awards<BR>
($/Sh)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Grant Date<BR>
Fair Value of<BR>
Stock and<BR>
Option<BR>
Awards<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=12><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>Geoffrey S. M. Hedrick</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=12><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>Raymond J. Wilson</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2/9/2007</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(1)</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,386</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>27,512</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>(2)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=12><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>Roman G. Ptakowski</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=12><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>James J. Reilly</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=12><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Upon
Mr.&nbsp;Wilson's appointment to the Company's Board of Directors, he was awarded a pro-rated restricted stock award representing 50% of the number of shares
subject to awards made to non-employee directors who were members of the Board at the beginning of the fiscal year. Mr.&nbsp;Wilson's restricted stock award provided that, subject to his
continued service with the Company, his restricted stock would vest in 50% increments on the first day of each of the two fiscal quarters thereafter.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>On
February&nbsp;9, 2007, the closing market price of the Company's common stock was $19.85 per&nbsp;share. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di42101_outstanding_equity_awards_at_fiscal_year-end"> </A>
<A NAME="toc_di42101_3"> </A>
<BR></FONT><FONT SIZE=2><B>OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="CENTER"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=11><HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="CENTER"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER"><FONT SIZE=1><B>Option Awards(1)<BR> </B></FONT><BR></TH>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=11><HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
of Securities<BR>
Underlying<BR>
Unexercised<BR>
Options<BR>
(#) Exercisable<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
of Securities<BR>
Underlying<BR>
Unexercised<BR>
Options<BR>
(#) Unexercisable<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Equity<BR>
Incentive Plan<BR>
Awards<BR>
Number of<BR>
Securities<BR>
Underlying<BR>
Unexercised<BR>
Unearned<BR>
Options (#)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Option<BR>
Exercise<BR>
Price ($)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Option<BR>
Expiration<BR>
Date<BR> </B></FONT><BR></TH>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=11><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Geoffrey S. M. Hedrick</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>7.33</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8/4/2010</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=11><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Raymond J. Wilson</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=11><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Roman G. Ptakowski</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>180,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4.21</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5/9/2013</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=11><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>James J. Reilly</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>41,399</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>7.91</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2/9/2010</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>7.33</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8/4/2010</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>9,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>16.67</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11/1/2014</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=11><HR NOSHADE></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>With
the exception of Mr.&nbsp;Reilly, all of the stock options granted to named executive officers were fully vested prior to October&nbsp;1,&nbsp;2006.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Reilly
was granted an option to purchase 15,000 shares of the Company's common stock on November&nbsp;1, 2004. The terms of the option agreement evidencing such award
provide that the option will vest in 20% increments on each anniversary of the grant date, provided Mr.&nbsp;Reilly remains employed by the Company through each vesting&nbsp;date. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>29</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=32,EFW="2182035",CP="INNOVATIVE SOLUTIONS AND SUPPORT",DN="1",CHK=255631,FOLIO='29',FILE='DISK127:[08ZAC1.08ZAC42101]DI42101A.;26',USER='SSULLIV',CD='24-JAN-2008;13:13' -->
<A NAME="page_di42101_1_30"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di42101_option_exercises_and_stock_vested"> </A>
<A NAME="toc_di42101_4"> </A>
<BR></FONT><FONT SIZE=2><B>OPTION EXERCISES AND STOCK VESTED    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ALIGN="CENTER"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=9><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ALIGN="CENTER"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Option Awards<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Stock Awards<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=9><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Shares Acquired<BR>
on Exercise (#)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Value<BR>
Realized on<BR>
Exercise ($)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Number Of<BR>
Shares Acquired<BR>
on Vesting (#)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Value<BR>
Realized<BR>
on Vesting ($)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=9><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Geoffrey S. M. Hedrick</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=9><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Raymond J. Wilson</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,386</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>(1)</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>33,638.22</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>(2)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=9><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Roman G. Ptakowski</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=9><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>James J. Reilly</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=9><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Wilson
received a pro-rated award of restricted stock upon his appointment as a non-employee director as described in the Compensation Discussion
and Analysis section and Grants of Plan-Based Awards table&nbsp;above.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Wilson's
restricted stock vested with respect to 693 shares on each of March&nbsp;31, 2007 and June&nbsp;30, 2007. On March&nbsp;30 (the last trading day of March),
the closing market price of the Company's common stock was $25.32 per share, and accordingly, Mr.&nbsp;Wilson received stock valued at $17,546.76. On June&nbsp;29 (the last trading day of June),
the closing market price of the Company's common stock was $23.22 per share, and accordingly, Mr.&nbsp;Wilson received stock valued at&nbsp;$16,091.46. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di42101_potential_payments_upo__di402377"> </A>
<A NAME="toc_di42101_5"> </A>
<BR></FONT><FONT SIZE=2><B>POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL    <BR>    </B></FONT></P>

<UL>

<P><FONT SIZE=2><I> James J. Reilly  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Reilly currently holds a partially unvested option to purchase 15,000 shares of the Company's common stock. As of the last day of the Company's 2007
fiscal year, Mr.&nbsp;Reilly's option was unvested with respect to 9,000 shares subject thereto. Pursuant to the terms of the Company's 1998 Stock Option Plan, Mr.&nbsp;Reilly's unvested stock
option would vest in full upon a "Change in Control" of the Company. A "Change in Control" is deemed to occur pursuant to the 1998 Stock Option Plan when: the Company's shareholders approve a plan or
other arrangement pursuant to which the Company will be dissolved or liquidated; the Company's shareholders approve a definitive agreement to sell or otherwise dispose of substantially all of the
assets of the Company; or the Company's shareholders and the shareholders of the other constituent corporation (or its board of directors if shareholder action is not required) approve a definitive
agreement to merge or consolidate the Company. Accordingly, if a Change in Control occurred on the last day of the Company's 2007 fiscal year, Mr.&nbsp;Reilly's option would vest with respect to the
9,000&nbsp;shares that are currently unvested and he would be entitled to the appreciation in value of the 9,000&nbsp;shares since the date of grant. The appreciation in value to which
Mr.&nbsp;Reilly would be entitled, based on the closing market price of the Company's common stock on September&nbsp;28, 2007 ($18.97 per share), is&nbsp;$20,700. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>30</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_dk42101_1_31"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dk42101_shareholder_proposals_for_2009__sha02364"> </A>
<A NAME="toc_dk42101_1"> </A>
<BR></FONT><FONT SIZE=2><B>SHAREHOLDER PROPOSALS FOR 2009 ANNUAL MEETING<BR>  AND OTHER MATTERS    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders wishing to submit proposals for inclusion in the proxy statement for the 2009 Annual Meeting of Shareholders must submit such proposals to us at 720
Pennsylvania Drive, Exton, PA 19341, Attention: Raymond J. Wilson, on or before October&nbsp;10, 2008. In order for the proposal to be included in the proxy statement, the shareholder submitting the
proposal must meet certain eligibility standards and comply with the procedures established by the SEC as set forth in Rule&nbsp;14a-8 of the Securities Exchange Act of&nbsp;1934. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May&nbsp;21, 1998, the Securities and Exchange Commission adopted an amendment to Rule&nbsp;14a-4, issued under the Securities Exchange Act of 1934. The amendment to
Rule&nbsp;14a-4(c)(1) governs a company's use of discretionary proxy voting authority for a shareholder proposal which the shareholder has not sought to include in our proxy statement.
The amendment provides that if a proponent of a proposal fails to notify a company at least 45&nbsp;days prior to the month and day of mailing of the prior year's proxy statement (or any date
specified in an advance notice provision), then the management proxies will be allowed to use their discretionary voting authority when the proposal is raised at the meeting, without any discussion of
the matter in the proxy statement. With respect to our 2009 Annual Meeting of Shareholders, if we are not provided notice of a shareholder proposal, which the shareholder has not previously sought to
include in our proxy statement, by December&nbsp;29, 2008, the management proxies will be allowed to use their discretionary authority. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
by-laws provide that a shareholder proposal (including a shareholder nomination of a director) must meet certain predetermined requirements in order to be considered at
the Annual Meeting. In order to be considered, a shareholder's proposal must be made in writing and delivered to or received at our principal executive offices not less than one hundred twenty
(120)&nbsp;days nor more than one hundred fifty (150)&nbsp;days prior to the meeting in the case of an annual meeting that is called for a date that is within 30&nbsp;days before or after the
anniversary date of the immediately preceding annual meeting of shareholders. However, in the case of an annual meeting that is called for a date that is not within 30&nbsp;days before or after the
anniversary date of the immediately preceding annual meeting, proposals must be received not later than the close of business on the tenth (10th) day following the day on which notice of the date of
the meeting was mailed or public disclosure of the date of the meeting was made, whichever occurs first. The notice to the Secretary must set forth certain information as specified in
our&nbsp;by-laws. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the date of this proxy statement, the Board knows of no other business which may properly be and is likely to be brought before the annual meeting. If a shareholder proposal that
was excluded from this proxy statement in accordance with Rule&nbsp;14a-8 of the Securities Act or our by-laws is properly brought before the annual meeting, it is intended
that the proxy holders will use their discretionary authority to vote the proxies against said proposal. If any other matters should arise at the annual meeting, shares represented by proxies will be
voted at the discretion of the proxy&nbsp;holders. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dk42101_independent_registered_public_accounting_firm"> </A>
<A NAME="toc_dk42101_2"> </A>
<BR></FONT><FONT SIZE=2><B>Independent Registered Public Accounting Firm    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Principal Accountant Fees and Services  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The audit committee retained Deloitte&nbsp;&amp; Touche,&nbsp;LLP to provide audit services for the fiscal years ended September&nbsp;30, 2007 and 2008. A
representative of Deloitte&nbsp;&amp; Touche,&nbsp;LLP will be present at the meeting and will have an opportunity to make a statement and, also, respond to appropriate questions from shareholders. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Services
provided by Deloitte&nbsp;&amp; Touche,&nbsp;LLP included an audit of the annual consolidated financial statements of the company, an audit of the effectiveness of internal
controls over financial reporting as required by the Sarbanes-Oxley Act of 2002 and other services related to filings made with </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>31</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=34,EFW="2182035",CP="INNOVATIVE SOLUTIONS AND SUPPORT",DN="1",CHK=144602,FOLIO='31',FILE='DISK127:[08ZAC1.08ZAC42101]DK42101A.;12',USER='RBURCH',CD='24-JAN-2008;00:59' -->
<A NAME="page_dk42101_1_32"> </A>
<BR>

<P><FONT SIZE=2>the
SEC. The aggregate fees billed by Deloitte&nbsp;&amp; Touche,&nbsp;LLP in connection with services rendered during fiscal year ended September&nbsp;30, 2007 and 2006&nbsp;were: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="66%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>FY 2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>FY 2006</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Audit Fees</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>420,908</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>407,180</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Audit Related Fees</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>18,725</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>17,150</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Tax Fees</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>58,795</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>$3,900</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>498,428</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>428,230</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Audit Fees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit fees for fiscal 2007 and 2006 were for professional services rendered for the audit of our annual consolidated financial statements, auditing the
effectiveness of our internal controls over financial reporting, review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by
Deloitte&nbsp;&amp; Touche,&nbsp;LLP in connection with statutory and regulatory filings or&nbsp;engagements. </FONT></P>

<P><FONT SIZE=2><B>Audit Related Fees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit related fees for fiscal 2007 and 2006 were for audits of our 401(k) Plan. </FONT></P>

<P><FONT SIZE=2><B>Tax-Related Fees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax-related fees for fiscal 2007 were related to preparation of returns and the related fees for 2006 were related to assistance with an IRS
examination for the fiscal year&nbsp;2002. </FONT></P>

<P><FONT SIZE=2><B>All Other Fees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No fees were incurred in connection with services provided by Deloitte&nbsp;&amp; Touche during fiscal years 2007 and 2006 other than as described above. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Pre-Approved Policies and Procedures  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee's policy is to pre-approve the engagement of accountants to render all audit and tax-related services for the Company,
as well as any changes to the terms of the engagement. The Audit Committee will also pre-approve all proposed non-audit related services to be provided by the Company's
independent registered public accounting firm. The Audit Committee reviews the terms of the engagement, a description of the engagement, and a budget for the engagement. The request for services must
be specific as to the particular services to be provided. Requests are aggregated and submitted to the Audit Committee in one of the following ways: requesting approval of services at a meeting of the
Audit Committee, through a written consent or by a designated member of the Audit Committee. The Audit Committee approved all 2007 and 2006 fees paid to the independent registered public
accounting&nbsp;firm. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the adoption of the revised Audit Committee Charter, the Board of Directors has adopted a policy which prohibits the Company from entering into non-audit related
consulting agreements for financial information systems design and implementation, for certain other services considered to have an impact on independence, and for all other services prohibited by the
Sarbanes-Oxley Act of 2002 and new Securities and Exchange Commission regulations. The policy also contains procedures requiring Audit Committee pre-approval of all audit and permitted
non-audit services provided by the Company's independent registered public accounting&nbsp;firm. </FONT></P>

<P><FONT SIZE=2>By
Order of the Board of Directors </FONT></P>

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<TR VALIGN="BOTTOM">
<TD WIDTH="42%"><FONT SIZE=2><BR>
Geoffrey S.M. Hedrick</FONT><HR NOSHADE><FONT SIZE=2><I>Chairman of the Board</I></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="51%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>January&nbsp;28, 2008 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>32</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dl42101_appendix_a"> </A>
<A NAME="toc_dl42101_1"> </A>
<BR></FONT><FONT SIZE=2><B>Appendix&nbsp;A    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dl42101_innovative_solutions_and_suppo__inn03061"> </A>
<A NAME="toc_dl42101_2"> </A></FONT> <FONT SIZE=2><B>INNOVATIVE SOLUTIONS&nbsp;AND SUPPORT,&nbsp;INC.<BR>  2008 STOCK-BASED INCENTIVE COMPENSATION PLAN    <BR>    </B></FONT></P>

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NAME="page_dm42101_1_1"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dm42101_innovative_solutions_and_suppo__inn03061"> </A>
<A NAME="toc_dm42101_1"> </A>
<BR></FONT><FONT SIZE=2><B>INNOVATIVE SOLUTIONS&nbsp;AND SUPPORT,&nbsp;INC.<BR>  2008 STOCK-BASED INCENTIVE COMPENSATION PLAN    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Purpose of the Plan.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The purpose of the Innovative Solutions&nbsp;and Support,&nbsp;Inc.
Stock-Based Incentive Compensation Plan is to assist the Company and its Subsidiaries in attracting and retaining valued Employees, Consultants and Non-Employee Directors by offering them
a greater stake in the Company's success and a closer identity with it, and to encourage ownership of the Company's stock by such Employees, Consultants and Non-Employee Directors. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Definitions.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As used herein, the following definitions shall apply: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Award</I></FONT><FONT SIZE=2>" means an award of Restricted Stock, Options, SARs, or other stock-based award under the&nbsp;Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Award Agreement</I></FONT><FONT SIZE=2>" means the written agreement, instrument or document evidencing an&nbsp;Award. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Board</I></FONT><FONT SIZE=2>" means the Board of Directors of the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Cause</I></FONT><FONT SIZE=2>" means, </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;if
the applicable Participant is party to an effective employment, consulting, severance or similar agreement with the Company or a Subsidiary, and such term is defined
therein, "Cause" shall have the meaning provided in such&nbsp;agreement; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;if
the applicable Participant is not a party to an effective employment, consulting, severance or similar agreement or if no definition of "Cause" is set forth in the
applicable employment, consulting,
severance or similar agreement, "Cause" shall have the meaning provided in the applicable Award Agreement; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;if
neither (a)&nbsp;nor (b)&nbsp;applies, then "Cause" shall mean, as determined by the Committee in its sole discretion, (i)&nbsp;the Participant's willful
misconduct or gross negligence in connection with the performance of the Participant's duties for the Company or its Subsidiaries; (ii)&nbsp;the Participant's conviction of, or a plea of </FONT> <FONT SIZE=2><I>nolo contendere</I></FONT><FONT SIZE=2>
to, a felony or a crime involving fraud or moral turpitude; (iii)&nbsp;the Participant's engaging in any business that directly or
indirectly competes with the Company or its Subsidiaries; (iv)&nbsp;disclosure of trade secrets, customer lists or confidential information of the Company, its Subsidiaries or Affiliates to a
competitor or unauthorized person. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Change in Control</I></FONT><FONT SIZE=2>" means, unless otherwise determined by the Committee or provided in an Award Agreement: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;the
acquisition in one or more transactions during any 12-month period by any "Person" (as such term is used for purposes of section&nbsp;13(d) or
section&nbsp;14(d) of the Exchange Act) but excluding, for this purpose, the Company or its Subsidiaries or any employee benefit plan of the Company or its Subsidiaries, of "Beneficial Ownership"
(within the meaning of Rule&nbsp;13d-3 under the Exchange Act) of thirty percent (30%) or more of the combined voting power of the Company's then outstanding voting securities (the
"</FONT><FONT SIZE=2><I>Voting Securities</I></FONT><FONT SIZE=2>"); </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;the
date at least a majority of the individuals who, as of the effective date of the Plan, constitute the Board (the "</FONT><FONT SIZE=2><I>Incumbent
Board</I></FONT><FONT SIZE=2>") is replaced during any 12-month period; provided, however, that if the election, or nomination for election by the Company's shareholders, of any new
director was approved by a vote of at least a majority of the Incumbent Board, such new director shall be considered as a member of the Incumbent Board, and provided further that any reductions in the
size of the Board that are instituted voluntarily by the Incumbent Board shall not constitute a Change in Control, and after any such reduction the "Incumbent Board" shall mean the Board as
so&nbsp;reduced; </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-1</FONT></P>

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<UL>
<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;the
consummation of a merger or consolidation involving the Company if the shareholders of the Company, immediately before such merger or consolidation, do not own,
directly or indirectly, immediately following such merger or consolidation, more than seventy percent (70%) of the combined voting power of the outstanding Voting Securities of the corporation
resulting from such merger or consolidation;&nbsp;or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;a
complete liquidation or dissolution of the Company or a sale or other disposition of all or substantially all of the assets of the&nbsp;Company. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Code</I></FONT><FONT SIZE=2>" means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code shall include
reference to any successor provision of the&nbsp;Code. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Common Stock</I></FONT><FONT SIZE=2>" means the common stock of the Company, par value $.001 per&nbsp;share. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.8.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Company</I></FONT><FONT SIZE=2>" means Innovative Solutions&nbsp;and Support,&nbsp;Inc., a Pennsylvania corporation, or any successor
corporation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.9.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Committee</I></FONT><FONT SIZE=2>" means the committee of two or more directors appointed by the Board to administer the Plan under
Section&nbsp;4, each of whom shall be a "non-employee director" as defined in Rule&nbsp;16b-3 under the Exchange Act and an "outside director" as defined in
Section&nbsp;162(m) of the Code and the regulations issued thereunder. In the absence of the appointment of any such Committee, any action permitted or required to be taken hereunder by the
Committee shall be deemed to refer to the&nbsp;Board. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.10.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Consultant</I></FONT><FONT SIZE=2>" means a natural person who provides bona fide services to the Company other than in connection with the
offer or sale of securities in a capital-raising transaction and is not engaged in activities that directly or indirectly promote or maintain a market for the Company's securities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.11.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Disability</I></FONT><FONT SIZE=2>" shall mean, unless otherwise provided in an Award Agreement, that the Participant is unable to engage in
any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12&nbsp;months. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.12.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Effective Date"</I></FONT><FONT SIZE=2> means the date that the Plan is approved by the shareholders of the Company in accordance with
applicable laws, resolutions or rules governing the applicable securities exchange. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.13.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Employee</I></FONT><FONT SIZE=2>" means an officer or other employee of the Company or a Subsidiary, including a director who is such
an&nbsp;employee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.14.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Exchange Act</I></FONT><FONT SIZE=2>" means the Securities Exchange Act of 1934, as amended. A reference to any provision of the Exchange Act
or rule promulgated under the Exchange Act shall include reference to any successor provision or&nbsp;rule. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.15.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Fair Market Value</I></FONT><FONT SIZE=2>" means, on any given date (i)&nbsp;if the shares of Common Stock are then listed on a national
securities exchange, including the Nasdaq Global Select ("NASDAQ"), the closing sales price per share of Common Stock on the exchange for such date, or if no sale was made on such date on the
exchange, on the last preceding day on which a sale occurred; (ii)&nbsp;if shares of Common Stock are not then listed on a national securities exchange but are then quoted on another stock quotation
system, the closing price for the shares of Common Stock as quoted on such quotation system on such date, or if no sale was made on such date on such quotation system, on the last preceding day on
which a sale was made; or (iii)&nbsp;if (i)&nbsp;and (ii)&nbsp;do not apply, such value as the Committee in its discretion may in good faith determine in accordance with Section&nbsp;409A of
the Code (and, with respect to Incentive Stock Options, Section&nbsp;422 of the Code) and the applicable guidance thereunder. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-2</FONT></P>

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<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.16.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Incentive Stock Option</I></FONT><FONT SIZE=2>" means an Option or portion thereof intended to meet the requirements of an incentive stock
option as defined in Section&nbsp;422 of the Code and designated as an Incentive Stock&nbsp;Option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.17.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>1998 Plan</I></FONT><FONT SIZE=2>" means the Innovative Solutions&nbsp;and Support,&nbsp;Inc. 1998 Stock Option Plan, as&nbsp;amended. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.18.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Non-Employee Director</I></FONT><FONT SIZE=2>" means a member of the Board who is not an&nbsp;Employee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.19.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Non-Qualified Option</I></FONT><FONT SIZE=2>" means an Option or portion thereof not intended to be an Incentive Stock Option, and
designated as a Non-Qualified Option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.20.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Option</I></FONT><FONT SIZE=2>" means a right granted under Section&nbsp;6.1 of the Plan to purchase a specified number of shares of Common
Stock at a specified price. An Option may be an Incentive Option or a Non-Qualified Option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.21.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Optionee</I></FONT><FONT SIZE=2>" means a person to whom an Option has been granted under the&nbsp;Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.22.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Participant</I></FONT><FONT SIZE=2>" means any Employee, Non-Employee Director or Consultant who receives an&nbsp;Award. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.23.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Performance Cycle</I></FONT><FONT SIZE=2>" means the period selected by the Committee during which the performance of the Company, any
Subsidiary, or any department thereof, or any individual is measured for the purpose of determining the extent to which a Performance Goal has been&nbsp;achieved. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.24.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Performance Goals</I></FONT><FONT SIZE=2>" means any goals established by the Committee in its sole discretion the attainment of which is
substantially uncertain at the time such goals are established. Performance Goals may be described in terms of Company-wide objectives or objectives that are related to the performance of
the individual Participant or the Subsidiary, division, department or function within the Company or Subsidiary in which the Participant is employed. Performance Goals may be measured on an absolute
or relative basis. Relative performance may be measured by a group of peer companies or by a financial market index. Performance Goals may be based upon: specified levels of or increases in the
Company's, a division's or a Subsidiary's return on capital, equity or assets; earnings measures/ratios (on a gross, net, pre-tax or post-tax basis), including diluted earnings
per share, total earnings, operating earnings, earnings growth, earnings before interest and taxes (EBIT) and earnings before interest, taxes, depreciation and amortization (EBITDA); net economic
profit (which is operating earnings minus a charge to capital); net income; operating income; sales; sales growth; gross margin; direct margin; share price (including but not limited to growth
measures and total shareholder return), operating profit; per period or cumulative cash flow (including but not limited to operating cash flow and free cash flow) or cash flow return on investment
(which equals net cash flow divided by total capital); inventory turns; financial return ratios; market share; balance sheet measurements such as receivable turnover; improvement in or attainment of
expense levels; improvement in or attainment of working capital levels; debt reduction; strategic innovation, including but not limited to entering into, substantially completing, or receiving
payments under, relating to, or deriving from a joint development agreement, licensing agreement, or similar agreement; customer or employee satisfaction; individual objectives; any other financial or
other measurement deemed appropriate by the Committee as it relates to the results of operations or other measurable progress of the Company and Subsidiaries (or any business unit thereof); and any
combination of any of the foregoing criteria. If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it
conducts its business, or other events or circumstances render the Performance Goals unsuitable, the Committee may modify such Performance Goals or the related minimum acceptable level of achievement,
in whole or in part, as the Committee deems appropriate and&nbsp;equitable. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-3</FONT></P>

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<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.25.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Plan</I></FONT><FONT SIZE=2>" means the Innovative Solutions&nbsp;and Support,&nbsp;Inc. 2008 Stock-Based Incentive Compensation Plan
herein set forth, as amended from time to&nbsp;time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.26.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Qualified Performance-Based Award</I></FONT><FONT SIZE=2>" means an Award or portion of an Award that is intended to satisfy the requirements
for "qualified performance-based compensation" under Section&nbsp;162(m) of the Code and the regulations issued thereunder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.27.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Restricted Stock</I></FONT><FONT SIZE=2>" means Common Stock awarded by the Committee under Section&nbsp;6.3 of the&nbsp;Plan. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.28.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Restriction Period</I></FONT><FONT SIZE=2>" means the period during which Restricted Stock awarded under Section&nbsp;6.3 of the Plan is
subject to&nbsp;forfeiture. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.29.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>SAR</I></FONT><FONT SIZE=2>" means a stock appreciation right awarded by the Committee under Section&nbsp;6.2 of the&nbsp;Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.30.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Securities Act</I></FONT><FONT SIZE=2>" means the Securities Act of 1933, as amended. A reference to any provision of the Securities Act or
rule promulgated under the Securities Act shall include reference to any successor provision or&nbsp;rule. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.31.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Subsidiary</I></FONT><FONT SIZE=2>" means any corporation, partnership, joint venture or other business entity of which 50% or more of the
outstanding voting power is beneficially owned, directly or indirectly, by the&nbsp;Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.32.&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Ten Percent Shareholder</I></FONT><FONT SIZE=2>" means a person who on any given date owns, either directly or indirectly (taking into account
the attribution rules contained in Section&nbsp;424(d) of the Code), stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or a&nbsp;Subsidiary. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Eligibility.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any Employee, Non-Employee Director or Consultant shall be eligible
to receive an Award; provided, however, that only persons who are employees of the Company or any subsidiary corporation (within the meaning of Section&nbsp;424(f) of the Code) may be granted
Options which are intended to qualify as Incentive Stock&nbsp;Options. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Administration and Implementation of Plan.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.&nbsp;&nbsp;The
Plan shall be administered by the Committee; provided, however, that the Board shall administer and otherwise exercise all powers of the Committee under the Plan
with respect to Awards granted to Non-Employee Directors. Notwithstanding the foregoing, the Committee may make recommendations to the full Board regarding Awards to
Non-Employee Directors. Any action of the Committee in administering the Plan shall be final, conclusive and binding on all persons, including the Company, its Subsidiaries, their
employees, Participants, persons claiming rights from or through Participants and shareholders of the&nbsp;Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.&nbsp;&nbsp;Notwithstanding
Section&nbsp;4.1, the Board shall serve as a "</FONT><FONT SIZE=2><I>Secondary Committee</I></FONT><FONT SIZE=2>" with the full authority to grant
Awards to eligible individuals who are not subject to the requirements of Rule&nbsp;16b-3 of the Exchange Act or Section&nbsp;162(m) of the Code and administer the Plan with respect to
such Awards. In all cases requiring an interpretation of the Plan related to an Award made by the Secondary Committee, the use of the term "Committee" herein shall refer to the Secondary Committee.
Notwithstanding the foregoing, the Board may delegate to one or more officers or Board members the authority to act as a Secondary Committee with the same authority with respect to selecting the
individuals to whom Awards are granted and establishing the terms and conditions of such Awards as the Secondary Committee has under the terms of the&nbsp;Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.&nbsp;&nbsp;Subject
to the provisions of the Plan, the Committee (or, as applicable, the Board) shall have full and final authority in its discretion to (i)&nbsp;select the
Employees, Non-Employee Directors and Consultants who will receive Awards pursuant to the Plan; (ii)&nbsp;determine the type or types of </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-4</FONT></P>

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<UL>
<BR>

<P><FONT SIZE=2>Awards
to be granted to each Participant; (iii)&nbsp;determine the number of shares of Common Stock to which an Award will relate, the terms and conditions of any Award granted under the Plan
(including, but not limited to, restrictions as to vesting, transferability or forfeiture, exercisability or settlement of an Award and waivers or accelerations thereof, and waivers of or
modifications to Performance Goals relating to an Award, based in each case on such considerations as the Committee shall determine) and all other matters to be determined in connection with an Award;
(iv)&nbsp;determine whether, to what extent, and under what circumstances an Award may be cancelled, forfeited, or surrendered; (v)&nbsp;determine whether, and to certify that, Performance Goals
to which the settlement of an Award is subject are satisfied; (vi)&nbsp;correct any defect or supply any omission or reconcile any inconsistency in the Plan, and adopt, amend and rescind such rules,
regulations, guidelines, forms of agreements and instruments relating to the Plan as it may deem necessary or advisable; (vii)&nbsp;construe and interpret the Plan; and (viii)&nbsp;make all other
determinations as it may deem necessary or advisable for the administration of the&nbsp;Plan. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Shares of Common Stock Subject to the Plan.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.&nbsp;&nbsp;Subject
to adjustment as provided in Section&nbsp;9, the total number of shares of Common Stock available for Awards under the Plan shall be that number of shares of
Common Stock that were reserved under the 1998 Plan but which, as of the effective date of this Plan, are not subject to grants under the 1998 Plan, increased by any shares of Common Stock subject to
grants under the 1998 Plan that are, following the effective date of this Plan, forfeited, cancelled or expire unexercised under the terms of the 1998 Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.&nbsp;&nbsp;No
more than 1,500,000 shares of Common Stock may be issued pursuant to Incentive Stock Options, and no more than 1,500,000 shares may be awarded to any Employee as a
Qualified Performance-Based Award in any one calendar year. Common Stock awarded under the Plan may be reserved or made available from the Company's authorized and unissued Common Stock or from Common
Stock reacquired and held in the Company's treasury. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3.&nbsp;&nbsp;Any
shares of Common Stock issued by the Company through the assumption or substitution of outstanding grants from an acquired company shall not reduce the shares of
Common Stock available for Awards under the&nbsp;Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.&nbsp;&nbsp;If
any shares subject to an Award under this Plan are forfeited or such Award otherwise terminates or is settled for any reason whatsoever without an actual
distribution of shares to the Participant, any shares counted against the number of shares available for issuance pursuant to the Plan with respect to such Award shall, to the extent of any such
forfeiture, settlement, or termination, again be available for Awards under the Plan; provided, however, that the Committee may adopt procedures for the counting of shares relating to any Award to
ensure appropriate counting, avoid double counting, provide for adjustments in any case in which the number of shares actually distributed differs from the number of shares previously counted in
connection with such Award, and if necessary, to comply with applicable law or&nbsp;regulations. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Awards.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Awards may be granted on the terms and conditions set forth in this Section&nbsp;6.
In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter, such additional terms and conditions, not inconsistent with the provisions of the Plan,
as the Committee shall determine, including without limitation terms requiring forfeiture of Awards in the event of the termination of employment or other relationship with the Company or any
Subsidiary by the Participant; provided, however, that the Committee shall retain full power to accelerate or waive any such additional term or condition as it may have previously imposed. The right
of a Participant to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such Performance Goals as may be determined by the Committee. Each Award, and the
terms and conditions applicable thereto, shall be evidenced by an Award Agreement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-5</FONT></P>

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<P><FONT SIZE=2><A
NAME="page_do42101_1_6"> </A> </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Options.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Options give a Participant the right to purchase a specified number of shares of Common Stock from
the Company for a specified time period at a fixed exercise price, as provided in the applicable Award Agreement. Options may be either Incentive Stock Options or Non-Qualified Stock
Options; provided that Incentive Stock Options may not be granted to Non-Employee Directors or Consultants. The grant of Options shall be subject to the following terms
and&nbsp;conditions: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Exercise Price.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The price per share at which Common Stock may be purchased upon exercise of an Option shall
be determined by the Committee and specified in the Award Agreement, but shall be not less than the Fair Market Value of a share of Common Stock on the date of grant (110% of Fair Market Value in the
case of an Incentive Stock Option granted to a Ten Percent Shareholder). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Term of Options.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The term of an Option shall be specified in the Award Agreement, but shall in no event be
greater than ten years (five years in the case of an Incentive Stock Option granted to a Ten Percent Shareholder). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Exercise of Option.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each Option grant shall specify the time or times at which an Option may be exercised in
whole or in part and the terms and conditions applicable thereto, including (i)&nbsp;a vesting schedule which may be based upon the passage of time, attainment of Performance Goals or a combination
thereof, (ii)&nbsp;whether the exercise price for an Option shall be paid in cash, with shares of Common Stock, with any combination of cash and shares of Common Stock, or with other legal
consideration that the Committee may deem appropriate, (iii)&nbsp;the methods of payment, which may include payment by attestation of shares and through cashless exercise arrangements, to the extent
permitted by applicable law, and (iv)&nbsp;the methods by which, or the time or times at which, Common Stock will be delivered or deemed to be delivered to Participants upon the exercise of such
Option. Payment of the exercise price shall in all events be made within three days after the date of exercise of an Option. Unless otherwise determined by the Committee, each Option shall be
exercisable for a period of 90&nbsp;days following termination of employment by the Company (or a Subsidiary) without Cause and one year following the Participant's death or Disability, to the
extent the Option was otherwise exercisable at the time of such termination, death or Disability. Unless otherwise determined by the Committee, for any other termination of employment, the Option
shall not be exercisable following termination of employment with the Company and its Subsidiaries. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Incentive Stock Options.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each Participant awarded an Incentive Stock Option under the Plan shall notify the
Company in writing immediately after the date he or she makes a disqualifying disposition (as defined in Section&nbsp;421(b) of the Code) of any shares of Common Stock acquired pursuant to the
exercise of such Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by it, retain possession of any shares acquired pursuant to the
exercise of an Incentive Stock Option as agent for the applicable Participant until the end of the period described in the preceeding sentence, subject to complying with any instructions from such
Participant as to the sale of such&nbsp;shares. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Stock Appreciation Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;An SAR shall confer on the Participant a right to receive, upon exercise
thereof, the excess of (i)&nbsp;the Fair Market Value of one share of Common Stock on the date of exercise over (ii)&nbsp;the grant price of the SAR as determined by the Committee, but which may
never be less than the Fair Market Value of a share of Common Stock on the date of grant. The grant of SARs shall be subject to the following terms and&nbsp;conditions: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Each
SAR grant shall specify the number of SARs granted, the time or times at which an SAR may be exercised in whole or in part (including vesting upon the passage of </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-6</FONT></P>

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<UL>
<UL>

<P><FONT SIZE=2>time,
the attainment of Performance Goals, or a combination thereof), the method of exercise, method of settlement (in cash, Common Stock or a combination thereof), form of consideration payable in
settlement, method by which Common Stock will be delivered or deemed to be delivered to Participants, and any other terms and conditions of any SAR. Unless otherwise determined by the Committee, each
SAR shall be exercisable for a period of 90&nbsp;days following termination of employment by the Company (or a Subsidiary) without Cause and one year following the Participant's death or Disability,
to the extent the SAR was otherwise exercisable at the time of such termination, death or Disability. Unless otherwise determined by the Committee, for any other termination of employment, the SAR
shall not be exercisable following termination of employment with the Company and its Subsidiaries. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;An
SAR granted under the Plan may be granted alone or in tandem with all or a portion of a related Option. An SAR granted in tandem with an Option must be granted at the
time of the grant of the Option to which it relates and shall be exercisable only to the extent the related Option is&nbsp;exercisable. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;The
term of an SAR shall be specified in the Award Agreement, but shall in no event be greater than ten&nbsp;years. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Restricted Stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;An Award of Restricted Stock is a grant by the Company of a specified number of shares of
Common Stock to the Participant, which shares are subject to forfeiture upon the happening of specified events during the Restriction Period. Such an Award shall be subject to the following terms
and&nbsp;conditions: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Each
Restricted Stock grant shall specify the duration of the Restriction Period and/or each installment thereof, the conditions under which the Restricted Stock may be
forfeited to the Company, and the amount, if any the Participant must pay to receive the Restricted Stock. Such restrictions may include a vesting schedule based upon the passage of time, the
attainment of Performance Goals or a combination thereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;During
the Restriction Period, the transferability of Restricted Stock shall be prohibited or restricted in the manner and to the extent prescribed in the applicable
Award Agreement. Such restrictions may include, without limitation, rights of repurchase or first refusal in the Company or provisions subjecting the Restricted Stock to a continuing substantial risk
of forfeiture in the hands of any&nbsp;transferee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Upon
determination of the number of shares of Restricted Stock to be granted to the Participant, the Committee shall direct that a certificate or certificates
representing the number of shares of Common Stock be issued to the Participant with the Participant designated as the registered owner. The certificate(s) representing such shares shall be legended as
to sale, transfer, assignment, pledge or other encumbrances during the Restriction Period and deposited by the Participant, together with a stock power endorsed in blank, with the Company, to be held
in escrow during the Restriction Period. At the end of the Restriction Period the restrictions imposed hereunder shall lapse with respect to the number of shares of Restricted Stock as provided in the
Award Agreement, and the legend shall be removed and such number of shares delivered to the Participant (or, where appropriate, the Participant's legal representative). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;Unless
otherwise provided in the applicable Award Agreement, during the Restriction Period the Participant shall have all the rights of a shareholder with respect to
Restricted Stock, including, without limitation, the right to receive dividends thereon (whether in cash or shares of Common Stock) and to vote such shares of Restricted Stock. Dividends shall be
subject to the same restrictions as the underlying Restricted Stock unless otherwise provided by the&nbsp;Committee. </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-7</FONT></P>

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<UL>
<UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;In
the sole discretion of the Committee, an Award Agreement regarding Restricted Stock may provide for a tax reimbursement cash payment to be made by the Company to any
Participant in connection with the tax consequences resulting from an Award of Restricted Stock, the lapse of restrictions on any Restricted Stock or the payment by a Participant of any taxes related
thereto, subject to such conditions as the Committee may&nbsp;specify. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Other Stock-Based Awards.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Committee is authorized, subject to limitations under applicable law, to
grant to Participants any type of Award other than an Award provided in Section&nbsp;6.1, 6.2, or 6.3 hereof that is payable in, or valued in whole or in part by reference to, shares of Common
Stock, and that is deemed by the Committee to be consistent with the purposes of the Plan. Such stock-based
Awards may include Awards granted in substitution for any other right of a Participant to receive payment of compensation from the Company or a&nbsp;Subsidiary. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Rules Applicable to Qualified Performance-Based Awards</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;To the extent the Committee determines, in its sole
discretion, necessary or advisable in order to comply with the deductibility limitations of Section&nbsp;162(m) of the Code applicable to Qualified Performance-Based Awards, the following rules
shall&nbsp;apply: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Only
an Employee who is a "</FONT><FONT SIZE=2><I>covered employee</I></FONT><FONT SIZE=2>" within the meaning of Section&nbsp;162(m) of the Code shall be eligible to
receive Qualified Performance-Based Awards. The Committee shall designate in its sole discretion which covered employees will be Participants for a Performance Cycle within the earlier of
(i)&nbsp;the first 90&nbsp;days of a Performance Cycle and (ii)&nbsp;the lapse of 25% of the Performance Cycle. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
Committee shall establish in writing within the earlier of (i)&nbsp;the first 90&nbsp;days of a Performance Cycle and (ii)&nbsp;the lapse of 25% of the
Performance Cycle, and in any event, while the outcome is substantially uncertain, (A)&nbsp;Performance Goals for the Performance Cycle, and (B)&nbsp;in respect of such Performance Goals, a
minimum acceptable level of achievement below which no payment will be made or no Award shall vest or become exercisable, and an objective formula or other method for determining the amount of any
payment to be made or the extent to which an Award hereunder shall vest or become exercisable if performance is at or above such minimum acceptable level but falls short of the maximum achievement of
the specified Performance Goals. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Following
the completion of a Performance Cycle, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance
Cycle have been achieved and, if so, to also calculate and certify in writing the amount of the Qualified Performance-Based Awards earned for the period based upon the Performance Goals and the
related formulas or methods as determined pursuant to Section&nbsp;6.5(b). The Committee shall then determine the actual amount payable or the extent to which an Award is vested or exercisable as a
result of attainment of such Performance Goals under each Participant's Award for the Performance Cycle, and, in doing so, may reduce or eliminate, except as otherwise provided in the Award Agreement,
the amount of the Award. In no event shall the Committee have the authority to increase Award amounts to any Covered Employee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;An
Award granted, vesting or becoming exercisable with respect to a Performance Cycle shall be paid (unless such Award is subject to the Participant's exercise, which
exercise such Participant has not effectuated) as soon as practicable following completion of the certification described in Section&nbsp;6.5(c) but in no event later than December&nbsp;31 of the
year following the end of the Performance Cycle. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Additional Provisions Applicable to Awards.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Awards granted under the Plan may, in the discretion of the
Committee, be granted either alone or in addition to, in tandem with, or in substitution for, any other Award granted under the Plan or any award granted under any other </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-8</FONT></P>

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<A NAME="page_do42101_1_9"> </A>
<UL>

<P><FONT SIZE=2>plan
of the Company or any Subsidiary or any business entity acquired by the Company or any Subsidiary, or any other right of a Participant to receive payment from the Company or
any&nbsp;Subsidiary. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Exchange and Buy Out Provisions.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Committee may at any time exchange or buy out any
previously granted Award, or may provide in any Award Agreement terms and conditions under which the Participant must sell, or offer to sell, to the Company any unexercised Award, whether or not
vested, or any Common Stock acquired pursuant to such Award for a payment in cash, Common Stock or other property based on such terms and conditions as the Committee shall determine and communicate to
the Participant at the time that such offer is made or as may be set forth in the Award Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Change in Control.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding any provision in this Plan to the contrary and unless
otherwise provided in the applicable Participant's Award Agreement, upon the occurrence of a Change in Control, the following provisions shall&nbsp;apply: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Options and SARs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon a Change in Control, unless otherwise provided by the Committee or in an Award
Agreement, the Committee, in its discretion, may take one or more of the following actions with respect to all Options and/or SARs that are outstanding and unexercised as of such Change in Control:
(i)&nbsp;accelerate the vesting and exercisability of all such Options or SARs to the extent unvested and unexercisable, such that all outstanding Options or SARs are fully vested and exercisable,
(ii)&nbsp;cancel all outstanding vested Options or SARs in exchange for a cash payment in an amount equal to the excess, if any, of the Fair Market Value of the Common Stock underlying the
unexercised portion of the Option or SAR as of the date of the Change in Control over the exercise price of such portion, (iii)&nbsp;terminate all Options or SARs immediately prior to the Change in
Control, provided that the Company provide the Optionee an opportunity to exercise the Option within a specified period following the Optionee's receipt of a written notice of such Change in Control
and of the Company's intention to terminate the Option prior to such Change in Control, or (iv)&nbsp;require the successor corporation, following a Change in Control if the Company does not survive
such Change in Control, to assume all outstanding Options or SARs and to substitute such Options or SARs with awards involving the common stock of such successor corporation on terms and conditions
necessary to preserve the rights of Optionees or SAR Grantees with respect to such Options or&nbsp;SARs. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Other Awards.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon a Change in Control, all Awards of Restricted Stock, or other awards granted under
Section&nbsp;6.4, that are outstanding may, at the discretion of the Committee, become immediately and fully vested. In addition, upon a Change in Control, the Committee may take such other actions
as it deems appropriate with respect to the Awards described in the preceding sentence, including the immediate distribution of amounts that would not otherwise be payable as of the date of the Change
in&nbsp;Control. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Committee Authority.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The judgment of the Committee with respect to any matter referred to in this
Section&nbsp;8 shall be conclusive and binding upon each Participant without the need for any amendment to the&nbsp;Plan. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;9.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Adjustments upon Changes in Capitalization.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.&nbsp;&nbsp;In
the event that the Committee shall determine that any stock dividend, recapitalization, forward split or reverse split, reorganization, merger, consolidation,
spin-off, combination, repurchase or share exchange, extraordinary or unusual cash distribution or other similar corporate transaction or event, affects the Common Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all
of (i)&nbsp;the number and kind of shares of Common Stock which may thereafter be issued in connection with Awards, (ii)&nbsp;the </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-9</FONT></P>

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<UL>

<P><FONT SIZE=2>number
and kind of shares of Common Stock issuable in respect of outstanding Awards, (iii)&nbsp;the aggregate number and kind of shares of Common Stock available under the Plan, (iv)&nbsp;the
limits described in Section&nbsp;5 of the Plan, and (v)&nbsp;the exercise or grant price relating to any Award or, if deemed appropriate, make provision for a cash payment with respect to any
outstanding Award; provided, however, in each case, that no adjustment shall be made that would adversely affect the status of any Award that is intended to be a Qualified Performance-Based Award,
unless the Committee expressly determines otherwise. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2.&nbsp;&nbsp;In
addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards, including any Performance Goals, in
recognition of unusual or nonrecurring events (including, without limitation, events described in Section&nbsp;15.1) affecting the Company or any Subsidiary, or in response to changes in applicable
laws, regulations, or accounting principles. Notwithstanding the foregoing, no adjustment shall be made in any outstanding Awards to the extent that such adjustment would adversely affect the status
of an Award intended to be a Qualified Performance-Based Award. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Termination and Amendment.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Changes to the Plan and Awards.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Board may amend, alter, suspend, discontinue, or terminate the Plan
without the consent of the Company's shareholders or Participants, except that any such amendment, alteration, suspension, discontinuation, or termination shall be subject to the approval of the
Company's shareholders if (i)&nbsp;such action would increase the number of shares subject to the Plan, (ii)&nbsp;decrease the price at which Awards may be granted, or (iii)&nbsp;such
shareholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system
on which the Common Stock may then be listed or quoted, and the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to the Company's shareholders for approval;
provided, however, that without the consent of an affected Participant, no amendment, alteration, suspension, discontinuation, or termination of the Plan may materially and adversely affect the rights
of such Participant under any outstanding Award unless such modification is necessary to ensure a deduction under Section&nbsp;162(m) of the Code or to avoid the additional tax described in
Section&nbsp;409A(a)(1)(B) of the&nbsp;Code. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.&nbsp;&nbsp;&nbsp;&nbsp;The
Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue, or terminate, any Award theretofore granted and any Award Agreement
relating thereto; provided, however, that without the consent of an affected Participant, no such amendment, alteration, suspension, discontinuation, or termination of any Award may materially and
adversely affect the rights of such Participant under such&nbsp;Award. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3.&nbsp;&nbsp;&nbsp;&nbsp;The
Committee may, without the consent of any Participant, substitute any Award granted under the Plan which by its terms is intended to be settled in shares for any
other type of Award intended to be settled in shares, provided, however, that the terms of the substituted Award and the economic benefit of the substituted Award are at least equivalent to the terms
and economic benefit of the Award being&nbsp;replaced. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.4.&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
anything in this Section&nbsp;10 to&nbsp;the contrary, any Performance Goal applicable to an Award shall not be deemed a fixed contractual term,
but shall remain subject to adjustment by the Committee, in its discretion at any time in view of the Committee's assessment of the Company's strategy, performance of comparable companies, and other
circumstances, except to the extent that any such adjustment to a performance condition would adversely affect the status of an Award intended to be a Qualified Performance-Based Award. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;11.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;No Right to Award, Employment or Service.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No Participant shall have any claim to be granted
any award under the Plan, and there is no obligation that the terms of Awards be uniform or consistent among Participants. Neither the Plan nor any action taken hereunder shall be construed as </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-10</FONT></P>

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<A NAME="page_do42101_1_11"> </A>

<P><FONT SIZE=2>giving
any Participant any right to be retained in the employ or service of the Company or any Subsidiary. For purposes of this Plan, transfer of employment between the Company and its Subsidiaries
and affiliates shall not be deemed a termination of&nbsp;employment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;12.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Taxes.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each Participant must make appropriate arrangement for the payment of any taxes
relating to an Award granted hereunder. The Company or any Subsidiary is authorized to withhold from any payment relating to an Award under the Plan, including from a distribution of Common Stock or
any payroll or other payment to a Participant amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Committee
may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include the
ability to withhold or receive Common Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant's tax obligations. Withholding of taxes in the form of
shares of Common Stock from the profit attributable to the Award shall not occur at a rate that exceeds the minimum required statutory federal and state withholding rates. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;13.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Limits on Transferability; Beneficiaries.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No Award or other right or interest of a
Participant under the Plan shall be pledged, encumbered, or hypothecated to, or in favor of, or subject to any lien, obligation, or liability of such Participant to, any party, other than the Company,
any Subsidiary or affiliate, or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution, and such Awards and rights shall be exercisable during the
lifetime of the Participant only by the Participant or his or her guardian or legal representative. Notwithstanding the foregoing, the Committee may, in its discretion, provide that Awards (other than
Incentive Stock Options) or other rights or interests of a Participant granted pursuant to the Plan be transferable, without consideration, to immediate family members (i.e.,&nbsp;children,
grandchildren or spouse), to trusts for the benefit of such immediate family members and to partnerships in which such family members are the only partners. The Committee may attach to such
transferability feature such terms and conditions as it deems advisable. In addition, a Participant may, in the manner established by the Committee, designate a beneficiary (which may be a person or a
trust) to exercise the rights of the Participant, and to receive any distribution, with respect to any Award upon the death of the Participant. A beneficiary, guardian, legal representative or other
person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as
otherwise determined by the Committee, and to any additional restrictions deemed necessary or appropriate by the&nbsp;Committee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;14.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Foreign Nationals.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Without amending the Plan, Awards may be granted to Employees or
Consultants who are foreign nationals or render services outside the United States or both, on such terms and conditions different from those specified in the Plan as may, in the judgment of the
Committee, be necessary or desirable to further the purpose of the&nbsp;Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;15.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Securities Law Requirements.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.1.&nbsp;&nbsp;&nbsp;&nbsp;No
shares of Common Stock may be issued hereunder if the Company shall at any time determine that to do so would (i)&nbsp;violate the listing requirements of an
applicable securities exchange, or adversely affect the registration or qualification of the Company's Common Stock under any state or federal law, or (ii)&nbsp;require the consent or approval of
any regulatory body or the satisfaction of withholding tax or other withholding liabilities. In any of the events referred to in clause&nbsp;(i) or clause&nbsp;(ii) above, the issuance of such
shares shall be suspended and shall not be effective unless and until such withholding, listing, registration, qualifications or approval shall have been effected or obtained free of any conditions
not acceptable to the Company in its sole discretion, notwithstanding any termination of any Award or any portion of any Award during the period when issuance has been&nbsp;suspended. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-11</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_do42101_1_12"> </A>
<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2.&nbsp;&nbsp;&nbsp;&nbsp;The
Committee may require, as a condition to the issuance of shares hereunder, representations, warranties and agreements to the effect that such shares are being
purchased or acquired by the Participant for investment only and without any present intention to sell or otherwise distribute such shares and that the Participant will not dispose of such shares in
transactions which, in the opinion of counsel to the Company, would violate the registration provisions of the Securities Act, and the rules and regulations thereunder. The certificates issued to
evidence such shares shall bear appropriate legends summarizing such restrictions on the disposition thereof. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;16.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Termination.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Unless earlier terminated, the Plan shall terminate on the 10-year
anniversary of the Effective Date, and no Awards under the Plan shall thereafter be&nbsp;granted. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;17.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Fractional Shares.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Company will not be required to issue any fractional shares of Common
Stock pursuant to the Plan. The Committee may provide for the elimination of fractions and settlement of such fractional shares of Common Stock in&nbsp;cash. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;18.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Discretion.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In exercising, or&nbsp;declining to exercise, any grant of authority or
discretion hereunder, the Committee may consider or ignore such factors or circumstances and may accord such weight to such factors and circumstances as the Committee alone and in its sole judgment
deems appropriate and without regard to the effect such exercise, or declining to exercise such grant of authority or discretion, would have upon the affected Participant, any other Participant, any
employee, the Company, any Subsidiary, any affiliate, any shareholder or any other&nbsp;person. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;19.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Governing Law.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The validity and construction of the Plan and any Award Agreements entered
into thereunder shall be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, but without giving effect to the conflict of laws principles thereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;20.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Effective Date.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Plan shall become effective upon the Effective Date, and no Award shall
become exercisable, realizable or vested prior to the Effective&nbsp;Date. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-12</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_dq42101_1_1"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dq42101_appendix_b"> </A>
<A NAME="toc_dq42101_1"> </A>
<BR></FONT><FONT SIZE=2><B>Appendix&nbsp;B    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dq42101_[innovative_solutions_and_support,_inc._letterhead]"> </A>
<A NAME="toc_dq42101_2"> </A></FONT> <FONT SIZE=2><B>[Innovative Solutions&nbsp;and Support,&nbsp;Inc. letterhead]    <BR>    </B></FONT></P>

<P><FONT SIZE=2>[Date]
</FONT></P>

<P><FONT SIZE=2>[Name]<BR>
[Address] </FONT></P>

<P><FONT SIZE=2>Dear
[Name]: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are pleased to inform you that on [Date] (the "</FONT><FONT SIZE=2><I>Grant Date</I></FONT><FONT SIZE=2>"), pursuant to the Innovative Solutions&nbsp;and
Support,&nbsp;Inc. 2008 Stock-Based Incentive Compensation Plan (the "</FONT><FONT SIZE=2><I>Plan</I></FONT><FONT SIZE=2>"), the Committee granted you a Non-Qualified Stock Option
(referred to herein as either the "</FONT><FONT SIZE=2><I>Option</I></FONT><FONT SIZE=2>" or "</FONT><FONT SIZE=2><I>Award</I></FONT><FONT SIZE=2>") to purchase&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of Common
Stock of Innovative Solutions&nbsp;and Support,&nbsp;Inc. (the "</FONT><FONT SIZE=2><I>Company</I></FONT><FONT SIZE=2>"). The exercise price of the Option is
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;] per&nbsp;share. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
letter (the "</FONT><FONT SIZE=2><I>Award Agreement</I></FONT><FONT SIZE=2>") sets forth the terms and conditions of your Award not otherwise provided in the Plan. Your Award is
subject to the applicable terms and conditions of the Plan, which are incorporated herein by reference, and in the event of any contradiction, distinction or difference between this Award Agreement
and the terms of the Plan, the terms of the Plan will control. All capitalized terms not otherwise defined herein have the meanings set forth in the&nbsp;Plan. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to your continued service with the Company or any of its Subsidiaries, your Award will vest and become exercisable as&nbsp;follows: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[VESTING
SCHEDULE] </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the terms of the Plan and your continued service with the Company or any of its Subsidiaries, your Award will remain exercisable until the tenth anniversary of the Grant Date
(the "</FONT><FONT SIZE=2><I>Expiration Date</I></FONT><FONT SIZE=2>"). Upon the date of your termination of service with the Company and its Subsidiaries (a "</FONT><FONT SIZE=2><I>Termination
Date</I></FONT><FONT SIZE=2>"), your Award shall remain exercisable (the "</FONT><FONT SIZE=2><I>Exercise Period</I></FONT><FONT SIZE=2>") only in accordance with the following provisions: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Upon
your termination of service with the Company and its Subsidiaries by reason of your death or Disability, any vested portion of your Award shall remain exercisable until
the earlier of: (a)&nbsp;one year after your Termination Date or (b)&nbsp;the Expiration&nbsp;Date.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Upon
your termination of service with the Company and its Subsidiaries by the Company (or a Subsidiary) without Cause, any vested portion of your Award shall remain
exercisable until the earlier of (a)&nbsp;90&nbsp;days after your Termination Date or (b)&nbsp;the Expiration&nbsp;Date.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Upon
your termination of service with the Company or any of its Subsidiaries for any other reason, any unexercised portion of your Award shall be immediately forfeited with
no further compensation due to you upon your Termination&nbsp;Date. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
vested and exercisable portion of your Award that is not so exercised within the applicable Exercise Period shall be forfeited with no further compensation due to you. Additionally,
unless otherwise provided by the Committee, any portion of your Award that is not vested or exercisable as of your Termination Date shall be immediately forfeited on such date with no further
compensation due to&nbsp;you. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
or part of the exercisable portion of your Option may be exercised by you upon (a)&nbsp;your written notice to the Company of exercise, (b)&nbsp;your payment of the applicable
exercise price in cash, with the proceeds received from a broker-dealer whom you have authorized to sell all or a portion of the Common Stock subject to your Option, or as otherwise may be permitted
by the Committee and (c)&nbsp;your having made appropriate arrangements with the Company for the withholding of any taxes </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-1</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_dq42101_1_2"> </A>
<BR>

<P><FONT SIZE=2>which
may be due with respect to your exercise of the Option. Payment of the exercise price of the Option shall in all events be made within three days of the date of&nbsp;exercise. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company may impose any additional conditions or restrictions on the Award or the exercise of the Option as it deems necessary or advisable to ensure that all rights granted under the
Plan satisfy the requirements of applicable securities and other laws. The Company shall not be obligated to issue or deliver any shares if such action violates any provision of any law or regulation
of any governmental authority or national securities exchange. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Committee may amend the terms of this Award to the extent it deems appropriate to carry out the terms of the Plan. The construction and interpretation of any provision of this Award
or the Plan shall be final and conclusive when made by the&nbsp;Committee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nothing
in this letter shall confer on you the right to continue in the service of the Company or its Subsidiaries or interfere in any way with the right of the Company or its
Subsidiaries to terminate your service at any&nbsp;time. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please
sign and return a copy of this agreement to [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;], designating your acceptance of this Award. This acknowledgement must be returned
within
thirty (30)&nbsp;days; otherwise, the Award shall lapse and become null and void. Your signature also shall acknowledge that you have received and reviewed the Plan and that you agree to be bound by
the applicable terms of such&nbsp;document. </FONT></P>

<P><FONT SIZE=2>Very
truly yours, </FONT></P>

<P><FONT SIZE=2>INNOVATIVE
SOLUTIONS&nbsp;AND SUPPORT,&nbsp;INC. </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="9%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
ACKNOWLEDGED AND ACCEPTED</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><BR><HR NOSHADE></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="15%"><FONT SIZE=2><BR>
Dated:</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2><BR>
&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>Enclosure&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Copy
of Plan) </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-2</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_dq42101_1_3"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dq42101_[innovative_solutions___dq402059"> </A>
<A NAME="toc_dq42101_3"> </A>
<BR></FONT><FONT SIZE=2><B>[Innovative Solutions&nbsp;and Support,&nbsp;Inc. letterhead]</B></FONT></P>

<P><FONT SIZE=2>[Date] </FONT></P>

<P><FONT SIZE=2>[Name]<BR>
[Address] </FONT></P>

<P><FONT SIZE=2>Dear
[Name]: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are pleased to inform you that on [Date] (the "</FONT><FONT SIZE=2><I>Grant Date</I></FONT><FONT SIZE=2>"), pursuant to the Innovative Solutions and
Support,&nbsp;Inc. 2008 Stock-Based Incentive Compensation Plan (the "</FONT><FONT SIZE=2><I>Plan</I></FONT><FONT SIZE=2>"), the Committee granted you an Incentive Stock Option (referred to herein
as either the "</FONT><FONT SIZE=2><I>Option</I></FONT><FONT SIZE=2>" or "</FONT><FONT SIZE=2><I>Award</I></FONT><FONT SIZE=2>") to purchase&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of Common Stock of Innovative
Solutions&nbsp;and Support,&nbsp;Inc. (the "</FONT><FONT SIZE=2><I>Company</I></FONT><FONT SIZE=2>"). The exercise price of the Option is&nbsp;[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
per&nbsp;share. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Option is designated as an Incentive Stock Option under Section&nbsp;422 of the Internal Revenue Code of 1986, as amended (the
"</FONT><FONT SIZE=2><I>Code</I></FONT><FONT SIZE=2>"). If and to the extent that the Option fails to qualify as an Incentive Stock Option under the Code, the Option shall remain outstanding
according to its terms as a nonqualified stock&nbsp;option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
letter (the "</FONT><FONT SIZE=2><I>Award Agreement</I></FONT><FONT SIZE=2>") sets forth the terms and conditions of your Award not otherwise provided in the Plan. Your Award is
subject to the applicable terms and conditions of the Plan, which are incorporated herein by reference, and in the event of any contradiction, distinction or difference between this Award Agreement
and the terms of the Plan, the terms of the Plan will control. All capitalized terms not otherwise defined herein have the meanings set forth in the&nbsp;Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to your continued employment with the Company or any of its Subsidiaries, your Award will vest and become exercisable as&nbsp;follows: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[VESTING
SCHEDULE] </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the terms of the Plan and your continued employment with the Company or any of its Subsidiaries, your Award will remain exercisable until the tenth anniversary (fifth
anniversary, in the case of a Ten Percent Shareholder) of the Grant Date (the "</FONT><FONT SIZE=2><I>Expiration Date</I></FONT><FONT SIZE=2>"). Upon the date of termination of your employment with
the Company and its Subsidiaries (a "</FONT><FONT SIZE=2><I>Termination Date</I></FONT><FONT SIZE=2>"), your Award shall remain exercisable (the "</FONT><FONT SIZE=2><I>Exercise
Period</I></FONT><FONT SIZE=2>") only in accordance with the following provisions: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Upon
the termination of your employment with the Company and its Subsidiaries by reason of your death or Disability, any vested portion of your Award shall remain
exercisable until the earlier of: (a)&nbsp;one year after your Termination Date or (b)&nbsp;the Expiration&nbsp;Date.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Upon
the termination of your employment with the Company and its Subsidiaries by the Company (or a Subsidiary) without Cause, any vested portion of your Award shall remain
exercisable until the earlier of (a)&nbsp;90&nbsp;days after your Termination Date or (b)&nbsp;the Expiration&nbsp;Date.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Upon
the termination of your employment with the Company or any of its Subsidiaries for any other reason, any unexercised portion of your Award shall be immediately
forfeited with no further compensation due to you upon your Termination&nbsp;Date. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
vested and exercisable portion of your Award that is not so exercised within the applicable Exercise Period shall be forfeited with no further compensation due to you. Additionally,
unless otherwise provided by the Committee, any portion of your Award that is not vested or exercisable as of your Termination Date shall be immediately forfeited on such date with no further
compensation due to&nbsp;you. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-3</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_dq42101_1_4"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
or part of the exercisable portion of your Option may be exercised by you upon (a)&nbsp;your written notice to the Company of exercise, (b)&nbsp;your payment of the applicable
exercise price in cash, with the proceeds received from a broker-dealer whom you have authorized to sell all or a portion of the Common Stock subject to your Option, or as otherwise may be permitted
by the Committee and (c)&nbsp;your having made appropriate arrangements with the Company for the withholding of any taxes which may be due with respect to your exercise of the Option. Payment of the
exercise price of the Option shall in all events be made within three days of the date of&nbsp;exercise. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you dispose of any shares of Common Stock acquired upon the exercise of this Option within two years from the Grant Date or one year after such shares were acquired pursuant to the
exercise of this Option (any such disposition, a "</FONT><FONT SIZE=2><I>Disqualifying Disposition</I></FONT><FONT SIZE=2>"), you acknowledge and agree that you shall notify the Company in writing of
such disposition. Any notice of a Disqualifying Disposition must be given within 30&nbsp;days of such disposition. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company may impose any additional conditions or restrictions on the Award or the exercise of the Option as it deems necessary or advisable to ensure that all rights granted under the
Plan satisfy the requirements of applicable securities and other laws. The Company shall not be obligated to issue or deliver any shares if such action violates any provision of any law or regulation
of any governmental authority or national securities exchange. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Committee may amend the terms of this Award to the extent it deems appropriate to carry out the terms of the Plan. The construction and interpretation of any provision of this Award
or the Plan shall be final and conclusive when made by the&nbsp;Committee. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nothing
in this letter shall confer on you the right to continued employment with Company or its Subsidiaries or interfere in any way with the right of the Company or its Subsidiaries to
terminate your employment at any&nbsp;time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please
sign and return a copy of this agreement to [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;], designating your acceptance of this Award. This
acknowledgement must be returned within
thirty (30)&nbsp;days; otherwise, the Award shall lapse and become null and void. Your signature also shall acknowledge that you have received and reviewed the Plan and that you agree to be bound by
the applicable terms of such&nbsp;document. </FONT></P>

<P><FONT SIZE=2>Very
truly yours, </FONT></P>

<P><FONT SIZE=2>INNOVATIVE
SOLUTIONS&nbsp;AND SUPPORT,&nbsp;INC. </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="9%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
ACKNOWLEDGED AND ACCEPTED</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><BR><HR NOSHADE></TD>
</TR>
</TABLE>
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="15%"><FONT SIZE=2>Dated:</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>Enclosure&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Copy
of Plan) </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-4</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_dq42101_1_5"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dq42101_[innovative_solutions___dq402060"> </A>
<A NAME="toc_dq42101_4"> </A>
<BR></FONT><FONT SIZE=2><B>[Innovative Solutions&nbsp;and Support,&nbsp;Inc. letterhead]</B></FONT></P>

<P><FONT SIZE=2>[Date] </FONT></P>

<P><FONT SIZE=2>[Name]<BR>
[Address] </FONT></P>

<P><FONT SIZE=2>Dear
[Name]: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are pleased to inform you that on [Date] (the "</FONT><FONT SIZE=2><I>Grant Date</I></FONT><FONT SIZE=2>"), pursuant to the Innovative Solutions&nbsp;and
Support,&nbsp;Inc. Stock-Based Incentive Compensation Plan (the "</FONT><FONT SIZE=2><I>Plan</I></FONT><FONT SIZE=2>"), the Committee granted you
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;] shares of
Common Stock (referred to herein as either the "</FONT><FONT SIZE=2><I>Restricted Stock</I></FONT><FONT SIZE=2>" or "</FONT><FONT SIZE=2><I>Award</I></FONT><FONT SIZE=2>") of Innovative
Solutions&nbsp;and Support,&nbsp;Inc. (the "</FONT><FONT SIZE=2><I>Company</I></FONT><FONT SIZE=2>"), subject to the restrictions set forth&nbsp;below. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Award is subject to the applicable terms and conditions of the Plan, which are incorporated herein by reference, and in the event of any contradiction, distinction or difference
between this letter and the terms of the Plan, the terms of the Plan will control. Unless otherwise stated, all capitalized terms used herein have the meanings set forth in the Plan. By accepting this
Award you (i)&nbsp;acknowledge that you have received and read a copy of the Plan and understand its terms and (ii)&nbsp;acknowledge that with respect to this Award and the Restricted Stock, you
are bound by the terms of the&nbsp;Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to your continued service with the Company or any of its Subsidiaries the restrictions applicable to your Restricted Stock will lapse, and your Award will be vested, as
follows:&nbsp;[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Should
your service with the Company and its Subsidiaries terminate for any reason before any portion of your Award vests, then that portion of your Award shall be forfeited with no
further compensation due to you. Finally, if you are terminated by the Company or any of its Subsidiaries for Cause, your entire Award, regardless of whether any or all of the shares of Restricted
Stock that relate to such Award are vested, shall be forfeited with no further compensation due to&nbsp;you. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
certificates are generally issued for other shares of stock of the Company, you may receive certificate(s) for the Restricted Stock designating you as the registered owner. Upon such
receipt, you agree to deliver the certificate(s) together with a signed and undated stock power, in the form of </FONT><FONT SIZE=2><I>Annex&nbsp;A</I></FONT><FONT SIZE=2> hereto, to&nbsp;the
Company or the Company's designee authorizing the Committee to transfer title to the certificate(s) representing any shares of Restricted Stock that are forfeited under the terms of the Plan and this
Award to the Company in the event that your service with the Company and its Subsidiaries should terminate for any reason prior to the lapse of the restrictions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
must make appropriate arrangements with the Company to provide for the withholding of the taxes that will be due with respect to this&nbsp;Award. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
certificates are generally issued for other shares of stock of the Company, then as promptly after each vesting date as possible, the Company will issue to you, or if such
certificates were previously issued, the Company will deliver to you, certificates for your vested shares of Restricted Stock. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
construction and interpretation of any provision of this Award or the Plan shall be final and conclusive when made by the&nbsp;Committee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nothing
in this letter shall confer on you the right to continue in the service of the Company or its Subsidiaries or interfere in any way with the right of the Company or its
Subsidiaries to terminate your service at any&nbsp;time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should sign and return a copy of this agreement to [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;] indicating your agreement to the terms of this
letter and the Award granted hereby. This
acknowledgement must be returned </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-5</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=53,EFW="2182035",CP="INNOVATIVE SOLUTIONS AND SUPPORT",DN="1",CHK=63095,FOLIO='B-5',FILE='DISK127:[08ZAC1.08ZAC42101]DQ42101A.;12',USER='JLAWRENA',CD='24-JAN-2008;13:23' -->
<A NAME="page_dq42101_1_6"> </A>
<BR>

<P><FONT SIZE=2>within
thirty (30)&nbsp;days; otherwise, the Award shall lapse and become null and void. Your signature will also acknowledge that this letter reflects our final agreement regarding the Award
granted hereunder and supersedes any prior written or oral agreement, understanding or communication otherwise regarding your Award, and that you have received and reviewed the Plan and that you agree
to abide by the applicable terms of these documents as provided herein. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><I>Signature Page Follows</I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-6</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_dq42101_1_7"> </A>

<P><FONT SIZE=2>Very
truly yours, </FONT></P>

<P><FONT SIZE=2>INNOVATIVE
SOLUTIONS&nbsp;AND SUPPORT,&nbsp;INC. </FONT></P>

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<TD WIDTH="9%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
ACKNOWLEDGED AND ACCEPTED</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><BR><HR NOSHADE></TD>
</TR>
</TABLE>
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="15%"><FONT SIZE=2>Dated:</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>Enclosures
</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-7</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_dr42101_1_8"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dr42101_annex_a_stock_power"> </A>
<A NAME="toc_dr42101_1"> </A>
<BR></FONT><FONT SIZE=2><B>Annex&nbsp;A    <BR>    <BR>    STOCK POWER    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For&nbsp;Value Received, [Name] hereby sells, assigns and transfers unto Innovative Solutions&nbsp;and
Support,&nbsp;Inc.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares of
Restricted Stock of Innovative Solutions&nbsp;and Support,&nbsp;Inc. standing in his name on the books of said corporation
[represented by Certificate No.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;] herewith and does hereby irrevocably constitute and
appoint&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;attorney to transfer
the said stock
on the books of the within named corporation with full power of substitution in the&nbsp;premises. </FONT></P>

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<TD WIDTH="12%"><FONT SIZE=2>By:</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
</TABLE>
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<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=2>Dated:</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
</TABLE>
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<TD WIDTH="34%"><FONT SIZE=2>In presence of</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>B-8</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ds42101_1_9"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ds42101_[innovative_solutions_and_support,_inc._letterhead]"> </A>
<A NAME="toc_ds42101_1"> </A>
<BR></FONT><FONT SIZE=2><B>[Innovative Solutions&nbsp;and Support,&nbsp;Inc. letterhead]    <BR>    </B></FONT></P>

<P><FONT SIZE=2>[Date] </FONT></P>

<P><FONT SIZE=2>[Name]<BR>
[Address] </FONT></P>

<P><FONT SIZE=2>Dear
[Name]: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are pleased to inform you that on [Date] (the "</FONT><FONT SIZE=2><I>Grant Date</I></FONT><FONT SIZE=2>"), pursuant to the Innovative Solutions&nbsp;and
Support,&nbsp;Inc. 2008 Stock-Based Incentive Compensation Plan (the "</FONT><FONT SIZE=2><I>Plan</I></FONT><FONT SIZE=2>"), the Committee granted you a stock appreciation right (hereinafter
referred to as the "</FONT><FONT SIZE=2><I>SARs</I></FONT><FONT SIZE=2>" or the "</FONT><FONT SIZE=2><I>Award</I></FONT><FONT SIZE=2>") to receive the appreciation in value of
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;] shares of Common Stock of Innovative Solutions&nbsp;and Support,&nbsp;Inc. (the "</FONT><FONT SIZE=2><I>Company</I></FONT><FONT SIZE=2>").
The base price
of the Award is [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;] per share. This Award [is/is not] being granted in connection with a grant of an Option under the&nbsp;Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
letter (the "</FONT><FONT SIZE=2><I>Award Agreement</I></FONT><FONT SIZE=2>") sets forth the terms and conditions of your Award not otherwise provided in the Plan. Your Award is
subject to the applicable terms and conditions of the Plan, which are incorporated herein by reference, and in the event of any contradiction, distinction or difference between this Award Agreement
and the terms of the Plan, the terms of the Plan will control. All capitalized terms not otherwise defined herein have the meanings set forth in the&nbsp;Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to your continued service with the Company or any of its Subsidiaries, your Award will vest and become exercisable as&nbsp;follows: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[VESTING
SCHEDULE] </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the terms of the Plan and your continued service with the Company or any of its Subsidiaries, your Award will remain exercisable until the tenth anniversary of the Grant Date
(the "</FONT><FONT SIZE=2><I>Expiration Date</I></FONT><FONT SIZE=2>"). Upon the date of your termination of service with the Company and its Subsidiaries (a "</FONT><FONT SIZE=2><I>Termination
Date</I></FONT><FONT SIZE=2>"), your Award shall remain exercisable (the "</FONT><FONT SIZE=2><I>Exercise Period</I></FONT><FONT SIZE=2>") only in accordance with the following provisions: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Upon
your termination of service with the Company and its Subsidiaries by reason of your death or Disability, any vested portion of your Award shall remain exercisable until
the earlier of: (a)&nbsp;one year after your Termination Date or (b)&nbsp;the Expiration&nbsp;Date.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Upon
your termination of service with the Company and its Subsidiaries by the Company (or a Subsidiary) without Cause, any vested portion of your Award shall remain
exercisable until the earlier of (a)&nbsp;90&nbsp;days after your Termination Date or (b)&nbsp;the Expiration&nbsp;Date.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Upon
your termination of service with the Company or any of its Subsidiaries for any other reason, any unexercised portion of your Award shall be immediately forfeited with
no further compensation due to you upon your Termination&nbsp;Date. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
vested and exercisable portion of your Award that is not so exercised within the applicable Exercise Period shall be forfeited with no further compensation due to you. Additionally,
unless otherwise provided by the Committee, any portion of your Award that is not vested or exercisable as of your Termination Date shall be immediately forfeited on such date with no further
compensation due to&nbsp;you. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
or part of the exercisable portion of your Award may be exercised by you upon your written notice to the Company of exercise. Upon your notification of the Company of exercise, you
will receive a payment (in Common Stock or cash, as determined by the Committee, in its discretion) equal to the difference between the base price of the Award and the fair market value of the Common
Stock covered by the Award on the date of exercise, less any applicable withholding. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-9</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ds42101_1_10"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company may impose any additional conditions or restrictions on the Award or the exercise of the Award as it deems necessary or advisable to ensure that all rights granted under the
Plan satisfy the requirements of applicable securities and other&nbsp;laws. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Committee may amend the terms of this Award to the extent it deems appropriate to carry out the terms of the Plan. The construction and interpretation of any provision of this Award
or the Plan shall be final and conclusive when made by the&nbsp;Committee. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nothing
in this letter shall confer on you the right to continue in the service of the Company or its Subsidiaries or interfere in any way with the right of the Company or its
Subsidiaries to terminate your service at any&nbsp;time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please
sign and return a copy of this agreement to [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;], designating your acceptance of this Award. This acknowledgement must be returned within
thirty (30)&nbsp;days; otherwise, the Award shall lapse and become null and void. Your signature also shall acknowledge that you have received and reviewed the Plan and that you agree to be bound by
the applicable terms of such&nbsp;document. </FONT></P>

<P><FONT SIZE=2>Very
truly yours, </FONT></P>

<P><FONT SIZE=2>INNOVATIVE
SOLUTIONS&nbsp;AND SUPPORT,&nbsp;INC. </FONT></P>

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<TD WIDTH="9%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
ACKNOWLEDGED AND ACCEPTED</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><BR><HR NOSHADE></TD>
</TR>
</TABLE>
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="15%"><FONT SIZE=2><BR>
Dated:</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2><BR>
&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>Enclosure&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Copy
of Plan) </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-10</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="RIGHT"><FONT SIZE=2><B>PROXY  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> INNOVATIVE SOLUTIONS AND SUPPORT,&nbsp;INC.<BR>
720 PENNSYLVANIA DRIVE, EXTON, PENNSYLVANIA 19341<BR>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS<BR>
PROXY FOR THE FEBRUARY 21, 2008 ANNUAL MEETING OF SHAREHOLDERS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby appoints Mr.&nbsp;Geoffrey S. M. Hedrick and Mr.&nbsp;Raymond J. Wilson and either of them as proxies, each with power of substitution,
and hereby authorizes them to represent the undersigned and to vote, as designated below, all the shares of Common Stock held of record by the undersigned on January&nbsp;7, 2008 at the Annual
Meeting of Shareholders of Innovative Solutions and Support,&nbsp;Inc., to be held on February&nbsp;21, 2008, at the Company's corporate offices, 720&nbsp;Pennsylvania Drive, Exton, Pennsylvania
beginning at 10:00&nbsp;a.m. local time, or at any adjournment or postponement thereof, upon the matters set forth in the Notice of Annual Meeting of Shareholders and Proxy Statement, receipt of
which is hereby acknowledged. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE AS TO ANY PARTICULAR ITEM, THIS PROXY WILL BE
VOTED "FOR" THE NOMINEES LISTED ON THIS PROXY. </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2><FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Please mark your votes as in this example.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2><BR>
1.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
Election of Class II Directors for a term of three years:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=2><BR>
Glen R. Bressner</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT> FOR NOMINEE</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT> WITHHOLD AUTHORITY</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=2><BR>
Robert E. Mittelstaedt, Jr.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT> FOR NOMINEE</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT> WITHHOLD AUTHORITY</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=2><BR>
Raymond J. Wilson</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT> FOR NOMINEE</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT> WITHHOLD AUTHORITY</FONT></TD>
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<TD WIDTH="3%"><FONT SIZE=2><BR>
2.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=5><FONT SIZE=2><BR>
Approval of the 2008 Stock-Based Incentive Compensation Plan.</FONT></TD>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;&nbsp;&nbsp;For
<FONT FACE="WINGDINGS">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;&nbsp;&nbsp;Against
<FONT FACE="WINGDINGS">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;&nbsp;&nbsp;Abstain <FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P><FONT SIZE=2>PLEASE SIGN, DATE AND RETURN THIS PROXY IMMEDIATELY IN THE ENCLOSED POSTAGE-PAID ENVELOPE </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>(Continued
and to be signed on reverse side.) </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><B>INNOVATIVE SOLUTIONS AND SUPPORT,&nbsp;INC.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
their discretion, the proxies are authorized to vote on such other business as may properly come before the meeting or any adjournments thereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS NO.&nbsp;1 AND NO.&nbsp;2. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED ABOVE. IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS NO.&nbsp;1 AND NO.&nbsp;2.</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Attendance
of the undersigned at the meeting, or at any adjournment or postponement thereof, will not be deemed to revoke this proxy unless the undersigned shall affirmatively indicate
at such meeting or session the intention of the undersigned to vote said share(s) in person. If the undersigned hold(s) any of the shares of the Company in a fiduciary, custodial or joint capacity or
capacities, this proxy is signed by the undersigned in every such capacity, as well as individually. </FONT></P>

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<TD WIDTH="58%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2><B>PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="58%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
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Date:</FONT></TD>
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&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
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SIGNATURE</FONT></TD>
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<TD WIDTH="58%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2><BR>
Date:</FONT></TD>
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&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
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SIGNATURE (if jointly owned)</FONT></TD>
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&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2><BR>
Note: Please sign name(s) exactly as appearing hereon. When signing as attorney, executor, administrator or other fiduciary, please give your full title as such. Joint owners should each sign personally. When signing as a corporation or a partnership,
 please sign in the name of the entity by an authorized person.</FONT></TD>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></DT><DD><FONT SIZE=2>Please
check this box if you plan to attend the meeting. </FONT></DD></DL>
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<P style='page-break-before:always'></p>
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