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                                                                    Exhibit 10.1

                INNOVATIVE SOLUTIONS AND SUPPORT, INCORPORATED
                       1988 INCENTIVE STOCK OPTION PLAN

         1. PURPOSE. Innovative Solutions and Support, Incorporated, a
Pennsylvania corporation (the "Company"), hereby adopts the Innovative Solutions
and Support, Incorporated 1988 Incentive Stock Option Plan effective August 4,
1988 (the "Plan"). The Plan is intended as an additional incentive to
individuals to enter into or remain in the employ of the Company or any
Affiliate (as defined below) and to devote themselves to the Company's success
by providing them with an opportunity to acquire or increase their proprietary
interest in the Company through receipt of rights (the "Options") to acquire the
Company's Common Stock, par value $0.001 (the "Common Stock"). Each Option
granted under the Plan is intended to be an incentive stock option ("ISO")
within the meaning of Section 422A(b) of the Internal Revenue Code of 1986 (the
"Code") for federal income tax purposes. For purposes of the Plan, the term
"Affiliate" shall mean a corporation which is a parent corporation or a
subsidiary corporation with respect to the Company within the meaning of section
425(e) or (f) of the Code.

         2. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company; however, subject to compliance with any applicable
by-law or agreement binding upon the Company, the Board of Directors may
designate a committee composed of two or more of its members to operate and
administer the Plan in its stead. The committee or the Board of Directors
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in its administrative capacity with respect to the Plan is referred to as the
"Committee".

                  (a) MEETINGS. The Committee shall hold meetings at such times
and places as it may determine. Acts approved at a meeting by a majority of the
members of the Committee or acts approved in writing by the unanimous consent of
the members of the Committee shall be the valid acts of the Committee.

                  (b) GRANTS. The Committee shall from time to time at its
discretion direct the Company to grant Options pursuant to the terms of the
Plan. The Committee shall have plenary authority to determine the employees to
whom and the times at which Options shall be granted, the number of Option
Shares (as defined in Section 4) to be granted and the price and other terms and
conditions thereof, subject, however, to the express provisions of the Plan. In
making such determinations the Committee may take into account the nature of the
employee's services and responsibilities, the employee's present and potential
contribution to the Company's success and such other factors as it may deem
relevant. The interpretation and construction by the Committee of any provision
of the Plan or of any Option granted under it shall be final, binding and
conclusive.

                  (c) EXCULPATION. No member of the Board of Directors or of the
Committee shall be personally liable for monetary damages as such for any action
taken or any failure to take any action in connection with the administration of
the Plan

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or the granting of Options under it unless (i) the director or member of the
Committee has breached or failed to perform the duties of his office under
Section 8363 of the Pennsylvania Directors' Liability Act (relating to standard
of care and justifiable reliance), and (ii) the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness; provided, however,
that the provisions of this subsection 2(c) shall not apply to the
responsibility or liability of a director or a member of the Committee pursuant
to any criminal statute or to the liability of a director or a member of the
Committee for the payment of taxes pursuant to local, state or federal law.

                  (d) INDEMNIFICATION. Each member of the Board of Directors or
of the Committee shall be entitled without further act on his part to indemnity
from the Company to the fullest extent provided by applicable law and the
Company's Articles of Incorporation and/or by-laws in connection with or arising
out of any action, suit or proceeding with respect to the administration of the
Plan or the granting of Options under it in which he may be involved by reason
of his being or having been a member of the Board of Directors or the Committee,
whether or not he continues to be such member of the Board or the Committee at
the time of the action, suit or proceeding.

         3. ELIGIBILITY. All employees of the Company or its Affiliates (who may
also be directors of the Company or its Affiliates) shall be eligible to receive
Options hereunder. An employee who receives an Option is referred to as an
"Optionee."

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The Committee, in its sole discretion, shall determine whether an individual
qualifies as an employee. An employee may receive more than one Option, but only
on the terms and subject to the restrictions of the Plan.

         4. OPTION SHARES. The aggregate maximum number of shares of the Common
Stock for which Options may be issued under the Plan is 45,000 shares, adjusted
as provided in Section 8 (the "Option Shares"). Option Shares shall be issued
from authorized and unissued Common Stock or Common Stock held in or hereafter
acquired for the treasury of the Company. If any outstanding Option granted
under the Plan expires, lapses or is terminated for any reason, the Option
Shares allocable to the unexercised portion of such Option may again be the
subject of an Option granted pursuant to the Plan.

         5. TERM OF PLAN. The Plan is effective as of August 4, 1988, the date
on which it was adopted by the Board of Directors. If the Plan is not approved
by vote of a majority of the outstanding voting stock of the Company on or
before August 4, 1989, no Option granted pursuant to the Plan shall be an ISO
and all Options granted under the Plan shall remain outstanding but shall not be
treated as ISOs. No Option may be granted under the Plan after August 4, 1998.

         6. TERMS AND CONDITIONS OF OPTIONS. Options granted pursuant to the
Plan shall be evidenced by written documents (the "Option Documents") in such
form as the Committee shall from time to time approve, which Option Documents
shall comply with and be

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subject to the following terms and conditions and such other terms and
conditions which the Committee shall from time to time require which are not
inconsistent with the terms of the Plan.

                  (a) NUMBER OF OPTION SHARES. Each Option Document shall state
the number of Option Shares to which it pertains.

                  (b) OPTION PRICE. Each Option Document shall state the price
at which Option Shares may be purchased (the "Option Price"), which shall be at
least 100% of the fair market value of the Common Stock on the date the Option
is granted as determined by the Committee; provided, however, that if an Option
is granted to an Optionee who then owns, directly or by attribution under
section 425(d) of the Code, shares possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or an Affiliate,
then the Option Price shall be at least 110% of the fair market value of the
Option Shares on the date the Option is granted. If the Common Stock is traded
in a public market, then the fair market value per share shall be the mean
between the closing "bid" and "asked" prices thereof or the mean between the
highest and lowest quoted selling prices thereof, as applicable and as the
Committee determines, on the day the Option is grated as reported in customary
financial reporting services.

                  (c) MEDIUM OF PAYMENT. An Optionee shall pay for Option Shares
(i) in cash, (ii) by certified check payable to the order of the Company, or
(iii) by such other mode of payment as the Committee may approve. Furthermore,
the Committee may

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provide in an Option Document that payment may be made all or in part in shares
of the Common Stock held by the Optionee for more than one year. If payment is
made in whole or in part in shares of the Common Stock, then the Optionee shall
deliver to the Company certificates registered in the name of such Optionee
representing shares of Common Stock owned by such Optionee, free of all liens,
claims and encumbrances of every kind and having an aggregate fair market value
on the date of delivery that is not greater than the Option Price of the Option
Shares with respect to which such Option is to be exercised, accompanied by
stock powers duly endorsed in blank by the Optionee. Notwithstanding the
foregoing, the Committee, in its sole discretion, may refuse to accept shares of
Common Stock in payment of the Option Price. In that event, any certificates
representing shares of Common Stock which were delivered to the Company shall be
returned to the Optionee with notice of the refusal of the Committee to accept
such shares in payment of the Option Price. The Committee may impose from time
to time such limitations and prohibitions on the use of shares of the Common
Stock to exercise an Option as it deems appropriate.

                  (d) TERMINATION OF OPTIONS. No Option shall be exercisable
after the first to occur of the following:

                           (i)   Expiration of the Option term specified in the
Option Document, which shall not exceed (A) ten years from the date of grant, or
(B) five years from the date of grant if the Optionee on the date of grant owns,
directly or by

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attribution under section 425(d) of the Code, shares possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or of an Affiliate;

                           (ii)  Expiration of three months from the date of
Optionee's employment with the Company or its Affiliates terminates for any
reason other than disability (within the meaning of section 22(e)(3) of the
Code), death or as specified in subsection 6(d)(iv) or (v), below;

                           (iii) Expiration of one year from the date the
Optionee's employment with the Company or its Affiliates terminates due to the
Optionee's disability (within the meaning of section 22(e)(3) of the Code) or
death;

                           (iv)  The date set by the Committee to be an
accelerated expiration date in the event of the occurrence of a transaction or
series of related transactions in which (A) the Company is dissolved or
liquidated or sells substantially all of its operating assets, (B) the Company
is not the surviving or acquiring entity or (C) the Company becomes an 80% or
more owned subsidiary of another company, in which case the Committee may take
whatever other action with respect to the Option, including acceleration of any
exercise provisions, it deems necessary or desirable; or

                           (v)   A finding by the Committee, after full
consideration of the facts presented on behalf of both the Company and the
Optionee, that the Optionee has breached his employment contract with the
Company or an Affiliate, or has been

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engaged in any sort of disloyalty to the Company or an Affiliate, including,
without limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his employment or service or has disclosed trade
secrets or confidential information of the Company or an Affiliate. In such
event, in addition to immediate termination of the Option, the Optionee, upon a
determination by the Committee, shall automatically forfeit all Option Shares
for which the Company has not yet delivered the share certificates upon refund
by the Company of the Option Price. Notwithstanding anything herein to the
contrary, the Company may withhold delivery of share certificates pending the
resolution of any inquiry that could lead to a finding resulting in a
forfeiture.

                  (e) TRANSFERS. No Option granted under the Plan may be
transferred, except by will or by the laws of descent and distribution. During
the lifetime of the person to whom an Option is granted, such Option may be
exercised only by him or his legal representative in the event of his
incompetence.

                  (f) OTHER PROVISIONS. The Option Documents shall contain such
other provisions including, without limitation, additional restrictions upon the
exercise of the Option, additional limitations upon the term of the Option,
restrictions on the transfer of Option Shares and conditions of forfeiture
applicable to Option Shares, as the Committee shall deem advisable.

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                  (g) ADDITIONAL BENEFITS. An Option Document may grant the
Optionee the right to receive additional compensation, in cash or other
property, from the Company at the time of exercise of the Option provided such
additional compensation is includible in income under the provisions of sections
61 and 83 of the Code. The additional compensation may be determined in any
manner specified by the Committee in the Option Document.

                  (h) AMENDMENT. The Committee shall have the right to amend
Option Documents issued to an Optionee subject to his consent, except that the
consent of the Optionee shall not be required for any amendment made under
subsection 6(d)(iv).

         7. EXERCISE. No Option shall be deemed to have been exercised prior to
the receipt by the Company of written notice of such exercise and of payment in
full of the Option Price for the Option Shares to be purchased. Each such notice
shall specify the number of Option Shares to be purchased and shall (unless the
Option Shares are covered by a then current registration statement or a
Notification under Regulation A under the Securities Act of 1933, as amended
(the "Act")), contain the Optionee's acknowledgment in form and substance
satisfactory to the Company that (a) such Option Shares are being purchased for
investment and not for distribution or resale (other than a distribution or
resale which, in the opinion of counsel satisfactory to the Company, may be made
without violating the registration provisions of the Act), (b) the Optionee has
been advised and understands that (i) the Option Shares have not been

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registered under the Act and are "restricted securities" within the meaning of
Rule 144 under the Act and are subject to restrictions on transfer and (ii) the
Company is under no obligation to register the Option Shares under the Act or to
take any action which would make available to the Optionee any exemption from
such registration, (c) such Option Shares may not be transferred without
compliance with all applicable federal and state securities laws, and (d) an
appropriate legend referring to the foregoing restrictions on transfer and any
other restrictions imposed under the Option Documents may be endorsed on the
certificates. Notwithstanding the above, should the Company be advised by
counsel that issuance of shares should be delayed pending (A) registration under
federal or state securities laws or (B) the receipt of an opinion that an
appropriate exemption therefrom is available, the Company may defer exercise of
any Option granted hereunder until either such event in (A) or (B) has occurred.

         8. ADJUSTMENTS ON CHANGES IN CAPITALIZATION. The aggregate number of
shares and class of shares as to which Options may be granted hereunder, the
number of shares covered by each outstanding Option and the Option Price thereof
shall be appropriately adjusted in the event of a stock dividend, stock split,
recapitalization or other change in the number or class of issued and
outstanding equity securities of the Company resulting from a subdivision or
consolidation of the Common Stock and/or other outstanding equity security or a
recapitalization or other

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capital adjustment (not including the issuance of Common Stock on the conversion
of other securities of the Company which are convertible into Common Stock)
affecting the Common Stock which is effected without receipt of consideration by
the Company. The Committee shall have authority to determine the adjustments to
be made under this Section and any such determination by the Committee shall be
final, binding and conclusive; provided, however, that no adjustment shall be
made which will cause an Option to lose its status as an ISO without the consent
of the Optionee.

         9. AMENDMENT OF THE PLAN. The Board of Directors of the Company may
amend the Plan from time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not, without obtaining
approval by vote of a majority of the outstanding voting stock of the Company,
within twelve months before or after such action, change the class of
individuals eligible to receive an Option, extend the expiration date of the
Plan, decrease the minimum Option Price of an Option or increase the maximum
number of shares as to which Options may be granted, except as provided in
Section 8 hereof. No amendment to the Plan shall adversely affect any
outstanding Option, however, without the consent of the Optionee.

         10. NO CONTINUED EMPLOYMENT. The grant of an Option pursuant to the
Plan shall not be construed to imply or to constitute evidence of any agreement,
express or implied, on the part of the Company of any Affiliate to retain the
Optionee in

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the employ of the Company or an Affiliate or in any other capacity.

         11. WITHHOLDING OF TAXES. Whenever the Company proposes or is required
to deliver or transfer Option Shares, property or cash in connection with the
exercise of an Option, the Company shall have the right to (a) require the
recipient to remit or otherwise make available to the Company an amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the delivery or transfer of any certificate or
certificates for such Option Shares, property or cash or (b) take whatever
action it deems necessary to protect its interests with respect to tax
liabilities, including, without limitation, withholding a portion of any Option
Shares, property or cash otherwise deliverable pursuant to the Plan. The
Company's obligation to make any delivery or transfer of Option Shares, property
or cash shall be conditioned on the Optionee's compliance with any withholding
requirement to the Company's satisfaction.

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