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                                                                    EXHIBIT 4.01

                            MERRIMAC INDUSTRIES, INC.
                        2001 KEY EMPLOYEE INCENTIVE PLAN

     1. Purpose. The purpose of the Merrimac Industries, Inc. 2001 Key Employee
Incentive Plan (the "Plan") is to give Merrimac Industries, Inc. (the "Company")
a competitive advantage in retaining and motivating key officers and employees
and to provide the Company and its Subsidiaries with a stock plan providing
incentives linked to increases in stockholder value. The Plan was approved by
the Board of Directors of the Company (the "Board") on April 20, 2001 (the
"Effective Date"), subject to approval by the stockholders of the Company at the
2001 Annual Meeting of Stockholders.

     2. Definitions. For purposes of the Plan, the following terms are defined
as set forth below:

         (a) "Cause" means: (i) a plea of guilty or nolo contendere to, or
conviction for, the commission of a felony offense by a Participant; (ii) a
material breach by a Participant of a fiduciary duty owed to the Company or any
of its Subsidiaries; (iii) a material breach by a Participant of any
nondisclosure, non-solicitation or non-competition obligation owed to the
Company or any of its Subsidiaries and (iv) the willful and continued failure or
gross neglect on the part of a Participant to perform his employment duties. The
Committee shall have the sole discretion to determine whether "Cause" exists,
and its determination shall be final.

         (b) "Change in Control" means the happening of any of the following
events:

            (i) The acquisition by any individual, entity or group (within the
     meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
     of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
     the Exchange Act) of 50% or more of the then outstanding shares of Common
     Stock of the Company ("Outstanding Company Common Stock"); provided,
     however, that for purposes of this subsection (i), the following
     acquisitions shall not constitute a Change in Control: (A) any acquisition
     by the Company, (B) any acquisition by any employee benefit plan (or
     related trust) sponsored or maintained by the Company or any of its
     Subsidiaries or (C) any acquisition by any Person pursuant to a transaction
     which complies with clauses (A) and (B) of subsection (iii); or

            (ii) Individuals who, as of the Effective Date, constitute the Board
     (the "Incumbent Board") cease for any reason to constitute at least a
     majority of the Board; provided, however, that any individual becoming a
     director subsequent to the Effective Date whose election, or nomination for
     election by the Company's stockholders, was approved by a vote of at least
     a majority of the directors then comprising the Incumbent Board shall be
     considered as though such individual were a member of the Incumbent Board,
     but excluding, for this purpose, any such individual whose initial
     assumption of office occurs as a result of an actual or threatened election
     contest with respect to the election or removal of directors or other
     actual or threatened solicitation of proxies or consents by or on behalf of
     a Person other than the Board; or

            (iii) Approval by the stockholders of the Company of a
     reorganization, merger or consolidation or sale or other disposition of all
     or substantially all of the assets of the Company or the purchase of assets
     or stock of another entity (a "Business Combination"), in each case, unless
     immediately following such Business Combination, (A) all or substantially
     all of the individuals and entities who were the beneficial owners of the
     Outstanding Company Common Stock immediately prior to such Business
     Combination will beneficially own, directly or indirectly, more than 50% of
     the combined voting power of the then outstanding securities entitled to
     vote generally in the election of directors of the corporation resulting
     from such Business Combination (including, without limitation, a
     corporation which as a result of such transaction owns the Company or all
     or substantially all of the Company's assets either directly or through one
     or more subsidiaries) and (B) at least a majority of the members of the
     board of directors of the

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     corporation resulting from such Business Combination will have been members
     of the Incumbent Board at the time of the initial agreement, or action of
     the Board, providing for such Business Combination; or

            (iv) Approval by the stockholders of the Company of a complete
     liquidation or dissolution of the Company.

         (c) "Change in Control Market Capitalization" means the number of
outstanding shares of Common Stock on the date of a Change in Control (excluding
any shares of Common Stock issued subsequent to the Effective Date, other than
shares of Common Stock issued (i) upon exercise of stock options granted to
employees, directors or consultants, (ii) through the purchase of shares of
Common Stock under any stock purchase plan maintained by the Company or its
Subsidiaries for the benefit of employees or (iii) upon the exercise of any or
all of the 360,000 warrants outstanding on the Effective Date), calculated on a
fully diluted basis, multiplied by the Change in Control Price.

         (d) "Change in Control Price" means the higher of (i) the highest Fair
Market Value during the 60-day period prior to and including the date of a
Change in Control or (ii) if the Change in Control is the result of a tender or
exchange offer or a Business Combination, the highest price per share of Common
Stock paid in such tender or exchange offer or Business Combination. To the
extent that the consideration paid in any such tender or exchange offer or
Business Combination consists all or in part of securities or other non-cash
consideration, the value of such securities or other noncash consideration shall
be determined in the sole discretion of the Committee.

         (e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.

         (f) "Committee" means the committee of directors which shall administer
the Plan and shall be appointed pursuant to Section 3.

         (g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.

         (h) "Common Stock" means the common stock, par value $0.01 per share,
of the Company, subject to adjustment as set forth in Section 5(f).

         (i) "Fair Market Value" means, as of any date, the closing price of the
Common Stock as reported on the American Stock Exchange (or, if the Common Stock
is listed on a different national securities exchange or in the over-the-counter
market, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national security exchange or
as reported by NASDAQ, as the case may be, on which the Common Stock is listed
or admitted to trading) on such date or, if there are no reported sales on such
date, on the last day prior to such date on which there are such reported sales.

         (j) "Market Capitalization" means, as of any date, the number of then
outstanding shares of Common Stock (excluding any shares of Common Stock issued
subsequent to the Effective Date, other than shares of Common Stock issued (i)
upon exercise of stock options granted to employees, directors or consultants,
(ii) through the purchase of shares of Common Stock under any stock purchase
plan maintained by the Company or its Subsidiaries for the benefit of employees
or (iii) upon the exercise of any or all of the 360,000 warrants outstanding on
the Effective Date), calculated on a fully diluted basis, multiplied by the Fair
Market Value.

         (k) "Participants" means the key employees of the Company and its
Subsidiaries who shall be eligible to participate in the Plan.

         (l) "Subsidiaries" means a corporation or other entity in which the
Company directly or indirectly controls 50% or more of the total combined voting
power of all classes of such corporation's or other entity's stock, equity
securities, partnership interests or membership interests.

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     3. Committee. The Plan shall be administered by the Committee, which shall
consist of two or more members of the Board both or all of whom are intended to
be "outside directors" within the contemplation of section 162(m)(4)(C)(i) of
the Code. The Committee shall be appointed annually by the Board, which may at
any time and from time to time remove any members of the Committee, with or
without cause, appoint additional members of the Committee and fill vacancies,
however caused, in the Committee. A majority of the members of the Committee
shall constitute a quorum. All determinations of the Committee shall be made by
a majority of its members present at a meeting duly called and held. Any
decision or determination of the Committee reduced to writing and signed by all
of the members of the Committee shall be fully as effective as if it had been
made at a meeting duly called and held.

     4. Administration. Concurrently with the adoption of the Plan, the
Committee shall determine the Participants and shall allocate to each
Participant the percentage share (the "Award Percentage") of the restricted
shares (the "Restricted Shares") that will be granted to such Participant in the
event that the Company achieves the performance goals provided in Section 5.
Subject to the express provisions of the Plan, the Committee shall have complete
authority, in its discretion, to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it and to make all other
determinations necessary or advisable for the administration of the Plan. In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective Participants, their present and
potential contributions to the success of the Company and its Subsidiaries and
such other factors as the Committee in its discretion shall deem relevant. The
Committee's determinations on the matters referred to in this Section 4 shall be
conclusive. Any dispute or disagreement which may arise hereunder, or as a
result of, or with respect to, any Restricted Shares shall be determined by the
Committee, in its sole discretion, and any interpretations by the Committee of
the terms thereof shall be final, binding and conclusive.

     5. Performance Goals.

         (a) $50,000,000 Market Capitalization. In the event that the Company
shall achieve an average Market Capitalization equal to or greater than
$50,000,000 during any six-month period during the five-year period beginning on
the Effective Date (the "$50,000,000 Market Capitalization"), then the Company
shall issue to each Participant who shall still be in the employ of the Company
or its Subsidiaries, subject to the terms and conditions set forth in Section 6,
the number of Restricted Shares determined by multiplying (i) such Participant's
Award Percentage, (ii) 5% and (iii) the average Market Capitalization during
such six-month period and dividing the product by the average Fair Market Value
during such six-month period. In no event shall Restricted Shares be issued more
than once pursuant to this Section 5(a).

         (b) $80,000,000 Market Capitalization. In the event that the Company
shall achieve an average Market Capitalization equal to or greater than
$80,000,000 during any six-month period during the five-year period beginning on
the Effective Date (the "$80,000,000 Market Capitalization"), then the Company
shall issue to each Participant who shall still be in the employ of the Company
or its Subsidiaries, subject to the terms and conditions set forth in Section 6,
the number of Restricted Shares determined by multiplying (i) such Participant's
Award Percentage, (ii) 5% and (iii) the average Market Capitalization during
such six-month period and dividing the product by the average Fair Market Value
during such six-month period. Such six-month period may be, in whole or in part,
coterminous with, the six-month period in which the $50,000,000 Market
Capitalization is achieved. In event shall Restricted Shares be issued more than
once pursuant to this Section 5(b).

         (c) Change in Control - $50,000,000 Market Capitalization. In the event
that there shall be a Change in Control prior to the achievement of the
$50,000,000 Market Capitalization and the Change in Control Market
Capitalization shall equal or exceed $50,000,000 but shall not exceed
$80,000,000, then the Company shall issue to each Participant who shall still be
in the employ of the Company or its Subsidiaries, the number of Restricted
Shares determined by multiplying (i) such Participant's Award Percentage, (ii)
5% and (iii) the Change in Control Market Capitalization and dividing the
product by the Change in Control Price.

         (d) Change in Control - $80,000,000 Market Capitalization. In the event
that there shall be a Change in Control prior to the achievement of the
$80,000,000 Market Capitalization and the Change in Control Market
Capitalization shall equal or exceed $80,000,000, then the Company shall issue
to each Participant who shall

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still be in the employ of the Company or its Subsidiaries, the number of
Restricted Shares determined by multiplying (i) such Participant's Award
Percentage, (ii) (A) if the $50,000,000 Market Capitalization shall have
previously been achieved, 5% or (B) if the $50,000,000 Market Capitalization
shall not have previously been achieved, 10% and (iii) the Change in Control
Market Capitalization and dividing the product by the Change in Control Price.

         (e) Maximum Grant. Notwithstanding anything to the contrary contained
herein, (i) the maximum value of Restricted Shares which may be granted to any
Participant upon achievement of the performance goals set forth in Section 5(a)
or (c) shall be $1,500,000 (based on the Fair Market Value on the date of
issuance of such shares), and (ii) the maximum value of Restricted Shares which
may be granted to any Participant upon achievement of the performance goals set
forth in Section 5(b) or (d) shall be $3,500,000 (based on the Fair Market Value
on the date of issuance of such shares); provided, however, that the maximum
value of Restricted Shares payable upon achievement of the performance goals set
forth in Section 5(d) shall be $5,000,000 (based on the Fair Market Value on the
date of issuance of such shares) in the event that the $50,000,000 Market
Capitalization shall not have been achieved prior to the date of the Change in
Control.

         (f) Adjustments. In the event of any change in corporate
capitalization, such as a stock dividend, stock split or a corporate
transaction, such as a merger, consolidation, separation, including a spin-off,
or other distribution of stock or property of the Company, any reorganization
(whether or not such reorganization comes within the definition of such term in
Section 368 of the Code) or any partial or complete liquidation of the Company,
the Committee may make such substitution or adjustments in the aggregate number
and kind of shares available for issuance under the Plan, to the extent
necessary to account for any such change in corporate capitalization and/or such
other equitable substitution or adjustments as it may determine to be
appropriate in its sole discretion.

     6. Restricted Stock Awards.

         (a) Certificates. Certificates issued in respect of Restricted Shares
shall be registered in the names of the Participants and shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Shares, substantially in the following form:

     "The transferability of this certificate and the shares of stock
     represented hereby are subject to the terms and conditions (including
     forfeiture) of the Merrimac Industries, Inc. 2001 Key Employee Incentive
     Plan. Copies of such Plan are on file at the offices of Merrimac
     Industries, Inc."

         (b) Holding of Shares. The Committee may require that the certificates
evidencing such shares be held in custody by the Company until the restrictions
thereon shall have lapsed and that, as a condition of any issuance of Restricted
Shares to a Participant, such Participant shall have delivered to the Company a
stock power, endorsed in blank, relating to such Restricted Shares.

         (c) Vesting. The Restricted Shares shall vest ratably in annual
installments over a three-year period commencing on the date of issuance. During
the vesting period, such Restricted Shares may not be sold, assigned,
transferred, pledged or otherwise encumbered. Upon a Participant's termination
of employment for any reason other than involuntary termination of employment by
the Company (other than for Cause), all unvested Restricted Shares shall be
forfeited by the Participant.

         (d) Holding Period. Restricted Shares which have vested may not be
sold, assigned, transferred, pledged or otherwise encumbered for a period of two
years following the vesting date of such Restricted Shares, except that
Restricted Shares may be sold by a Participant to the extent required to satisfy
all federal, state, local and foreign taxes of any kind, with respect to the
vesting of Restricted Shares, including the withholding obligation described in
Section 7.

         (e) Impact of Change in Control. Notwithstanding any other provision of
the Plan to the contrary, upon a Change in Control, all Restricted Shares shall
immediately become fully vested, transferable and free of all restrictions.


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         (f) Waiver of Restrictions. The Committee shall have the discretion to
waive, in whole or in part at any time, any or all remaining restrictions with
respect to any or all of a Participant's Restricted Shares.

     7. Tax Withholding. No later than the date as of which an amount first
becomes includible in the gross income of a Participant for federal income tax
purposes with respect to any grant of Restricted Shares or the vesting of
Restricted Shares, such Participant shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any federal,
state, local or foreign taxes of any kind required by law to be withheld with
respect to such amount. To the extent determined by the Committee, withholding
obligations may be settled with Common Stock, including Common Stock that is
part of the grant of Restricted Shares. The Company shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to such Participant. The Committee may establish such procedures
as it deems appropriate, including making irrevocable elections, for the
settlement of withholding obligations with Common Stock.

     8. Term, Amendment and Termination.

         (a) Term. The Plan will terminate on April 19, 2006; provided, however,
that any grants of Restricted Shares outstanding as of such date shall not be
affected or impaired by the termination of the Plan.

         (b) Amendment and Termination. The Board may amend, alter, or terminate
the Plan, but no amendment, alteration or termination shall be made which would
impair the rights of a Participant without the Participant's consent. In
addition, no such amendment shall be made without the approval of the Company's
stockholders to the extent such approval is required by law.

     9. No Employment Right. Neither the existence of the Plan nor the grant of
Restricted Shares shall require the Company or any Subsidiary to continue any
Participant in the employ or service of the Company or such Subsidiary.

     10. Compliance With Securities Laws. The Committee may require each
Participant to represent to and agree with the Company in writing that such
person is acquiring any Restricted Shares without a view to the distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan, the Company shall not be
required to issue or deliver any certificate for shares of Common Stock under
the Plan prior to fulfillment of all of the following conditions:

         (a) Listing or approval for listing upon notice of issuance of such
shares on the American Stock Exchange or such other securities exchange as may
at the time be the principal market for the Common Stock;

         (b) Any registration or other qualification of such shares under any
state or federal law or regulation or the maintaining in effect of any such
registration or other qualification which the Committee shall, in its absolute
discretion upon the advice of counsel, deem necessary or advisable; and

         (c) Obtaining any other consent, approval or permit from any state or
federal governmental agency which the Committee shall, in its absolute
discretion upon the advice of counsel, determine to be necessary or advisable.



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