Exhibit 10.1

Covidien Ltd.

2007 Stock and Incentive Plan

TERMS AND CONDITIONS

OF

OPTION AWARD

OPTION AWARD granted on December 1, 2008 (the “Grant Date”).

1. Grant of Option. Covidien Ltd. (the “Company”) has granted to you an Option
to purchase the number of Shares of Common Stock set forth in the Grant Letter
that issued this Option to you, subject to the provisions of these Terms and
Conditions and the Plan. This Option is a Nonqualified Stock Option. The grant
of this Option is conditioned expressly on your acceptance of the
“Non-Competition, Non-Solicitation, and Confidentiality Agreement” (the
“Agreement”) that accompanies this Option Award and the Grant Letter. You must
sign and return the Agreement to the Company such that the Company receives the
signed Agreement by January 30, 2009. If you do not sign and return the
Agreement by January 30, 2009, the Company will cancel this Option effective as
of such date and you will forfeit any rights hereunder. Please contact your
local Human Resources Representative if you have any questions.

2. Exercise Price. The Exercise Price required to purchase the Shares covered by
this Option is set forth in the Grant Letter.

3. Vesting. Except as provided below, Shares subject to this Option will vest
according to the following schedule:

 

Date

   Vested Percentage  

1st Anniversary of Grant Date

   25 %

2nd Anniversary of Grant Date

   50 %

3rd Anniversary of Grant Date

   75 %

4th Anniversary of Grant Date

   100 %

If your employment terminates before full (100%) vesting, you will forfeit the
unvested portion of this Option and may exercise the vested portion until the
earlier of (i) the date described in Section 4 below or (ii) 90 days after your
employment termination date. However, if your employment terminates due to
Normal Retirement (your employment terminates on or after age 60 and the sum of
your age and years of service equals at least 70), Retirement (your employment
terminates on or after age 55 and the sum of your age and years of service
equals at least 60), death, Disability, a Change in Control or Divestiture or
Outsourcing Agreement, this Option will become vested and exercisable in
accordance with the provisions of Section 7, 8 or 9, as applicable.

4. Term of Option. Unless this Option has been terminated or cancelled, it must
be exercised before the close of the New York Stock Exchange (“NYSE”) on the day
prior to the 10th anniversary of the Grant Date. If the NYSE is not open for
business on such date, this

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Option will expire at the close of the NYSE’s first business day that
immediately precedes the day prior to the 10th anniversary of the Grant Date.

5. Payment of Exercise Price. To exercise all or a portion of this Option, you
must pay the Exercise Price for each Share as set forth in the Grant Letter. You
may pay the Exercise Price in cash or by certified check, bank draft, wire
transfer or postal or express money order if applicable law permits such
exercise method at the time of exercise. You may also pay the Exercise Price by
using one or more of the following methods: (i) delivering a properly executed
exercise notice to the Company or its agent, together with irrevocable
instructions to a broker to deliver promptly, within the typical settlement
cycle for the sale of equity securities on the relevant trading market (or
otherwise in accordance with Regulation T issued by the Federal Reserve Board),
the amount of sale proceeds with respect o the portion of the Shares to be
acquired having a Fair Market Value on the date of exercise equal to the sum of
the applicable portion of the Exercise Price being so paid; (ii) tendering
(actually or by attestation) to the Company or its agent previously acquired
Shares that have a Fair Market Value on the day prior to the date of exercise
equal to the applicable portion of the Exercise Price being so paid; or
(iii) instructing the Company to reduce the number of Shares that would
otherwise be issued by such number of Shares as have in the aggregate a Fair
Market Value on the date of exercise equal to the applicable portion of the
Exercise Price being so paid. Notwithstanding the foregoing, you may not tender
any form of payment that the Company determines, in its sole discretion, could
violate any applicable law, regulation or Company policy. You are not required
to purchase all Shares subject to this Option at one time, but you must pay the
full Exercise Price for all Shares that you elect to purchase before they will
be delivered. The date of exercise of an Option shall be the date on which the
Company receives the Exercise Price for such Option. Notwithstanding anything in
this Section 5 to the contrary, if this Option is scheduled to expire due to the
expiration of the term on the date described in Section 4 above and the Fair
Market Value of a Company share on the last day of such term exceeds the
Exercise Price for this Option, then you shall be treated as having instructed
the Company to exercise the vested portion of this Option on the last day of
such term and to pay the Exercise Price by application of the method described
in (iii) above.

6. Exercise of Option. If you are entitled to exercise this Option, you may
exercise it by contacting UBS Financial Services through its web site at
www.ubs.com/onesource/cov or by calling 1-877-461-7805. If someone other than
you attempts to exercise this Option (for example, because the Option is being
exercised after your death), the Company will deliver the Shares only after
determining that the person attempting to exercise this Option is the duly
appointed executor or administrator of your estate or an individual to whom this
Option has been transferred in accordance with these Terms and Conditions and
the terms of the Plan.

7. Retirement, Normal Retirement, Disability or Death. Notwithstanding the
vesting and exercise provisions described in Section 3, this Option will vest
and remain exercisable if your Termination of Employment is a result of your
Retirement, Normal Retirement, Disability or death as follows:

(i) Retirement. If your employment terminates as a result of your Retirement (as
defined in Section 3) and your Retirement occurs less than 12 months after the
Grant Date, you will forfeit all Shares subject to this Option. If, however,
your Retirement occurs at least 12 months after the Grant Date, then you will be
entitled to pro

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rata vesting of this Option based on (A) the number of whole months completed
from Grant Date through your employment termination date divided by 48 times
(B) the total number of shares awarded under the Option minus (C) the number of
shares that previously vested. You will be entitled to exercise this Option
until the earlier of (1) the date described in Section 4 or (2) the third
anniversary of your Retirement date.

(ii) Normal Retirement, Disability or Death. If your employment terminates as a
result of your Normal Retirement (as defined in Section 3), your death or a
Disability, then you will become fully vested in this Option on the date of your
Normal Retirement, death or Termination of Employment due to Disability and be
entitled to exercise this Option until the earlier of (A) the date described in
Section 4 or (B) the third anniversary of the date of your Normal Retirement,
death or Termination of Employment due to Disability, as applicable.

8. Termination of Employment Following a Change in Control. Notwithstanding the
vesting and exercise provisions described in Section 3, you will become fully
vested in this Option on the date your employment terminates after a Change in
Control and be entitled to exercise this Option until the earlier of (A) the
date described in Section 4 or (B) the third anniversary of your employment
termination date, if you satisfy one of the following requirements:

(i) Within 12 months after a Change in Control, the Company terminates your
employment for any reason other than Cause, Disability or death; or

(ii) Within 12 months after a Change in Control and within 60 days after one of
the events listed in this Section 8(ii), you terminate your employment because
(A) the Company (1) assigns or causes to be assigned to you duties inconsistent
in any material respect with your position as in effect immediately prior to the
Change in Control; (2) makes or causes to be made any material adverse change in
your position (including titles and reporting relationships and level),
authority, duties or responsibilities; or (3) takes or causes to be taken any
other action which, in your reasonable judgment, would cause you to violate your
ethical or professional obligations (after written notice of such judgment has
been provided by you to the Company and the Company has been given a 15-day
period within which to cure such action), or which results in a significant
diminution in your position, authority, duties or responsibilities; or (B) the
Company, without your consent, (1) requires you to relocate to a principal place
of employment more than 50 miles from your existing place of employment; or
(2) reduces your base salary, annual bonus, or retirement, welfare, stock
incentive, perquisite (if any) and other benefits when taken as a whole.

9. Termination of Employment Resulting From Divestiture or Outsourcing
Agreement. Notwithstanding the vesting and exercise provisions described in
Section 3, and subject to the provisions of subsection (i) below, if your
employment terminates as a result of a Disposition of Assets, Disposition of a
Subsidiary or Outsourcing Agreement, then this Option will vest on a pro-rata
basis based on (A) the number of whole months completed from Grant Date through
the closing date of the applicable transaction divided by 48 times (B) the total
number of shares awarded under the Option minus (C) the number of shares that
previously vested. If you are entitled to pro rata vesting under this Section 9,
then the vested portion of this

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Option will expire on the earlier of (1) the date described in Section 4 or
(2) the third anniversary of your employment termination date.

(i) Notwithstanding the foregoing provisions of this Section 9, you shall not be
eligible for pro-rata vesting and an extended Option expiration date if (A) your
Termination of Employment occurs on or prior to the closing date of a
Disposition of Assets or Disposition of a Subsidiary or such later date as is
provided specifically in the applicable transaction agreement or related
agreements, or on the effective date of an Outsourcing Agreement (the
“Applicable Employment Date”), and (B) you are offered Comparable Employment
with the buyer, successor company or outsourcing agent, as applicable, but do
not commence such employment on the Applicable Employment Date.

(ii) For purposes of Section 9(i), (A) “Comparable Employment” means employment
at a location that is no more than 50 miles from your job location at the time
of your Termination of Employment that has a base salary and bonus target that
is at least equal to your base salary and bonus target in effect immediately
prior to your Termination of Employment; (B) “Disposition of Assets” means the
disposition by the Company or a Subsidiary of all or a portion of the assets
used by the Company or Subsidiary in a trade or business to an unrelated
individual or entity; (C) “Disposition of a Subsidiary” means the disposition by
the Company or Subsidiary of its interest in a subsidiary or controlled entity
to an unrelated individual or entity, provided that such subsidiary or
controlled entity ceases to be a member of the Company’s controlled group as a
result of such disposition; and (D) “Outsourcing Agreement” means a written
agreement between the Company or Subsidiary and an unrelated third party
(“Outsourcing Agent”) pursuant to which (1) the Company or Subsidiary transfers
the performance of services previously performed by Company or Subsidiary
employees to the Outsourcing Agent, and (2) the Outsourcing Agreement includes
an obligation of the Outsourcing Agent to offer employment to any employee whose
employment is being terminated as a result of or in connection with said
Outsourcing Agreement.

10. Withholdings. The Company has the right, prior to the issuance or delivery
of any Shares in connection with the exercise of this Option, to withhold or
require from you the amount necessary to satisfy applicable tax requirements, as
determined by the Committee. The methods described in Section 5 may also be used
by you to pay, or by the Company to satisfy, your withholding tax obligation.

11. Transfer of Option. You generally may not transfer this Option or any
interest in this Option except by will or the laws of descent and distribution.
However, you may transfer this Option to a “family member” (as defined in
Section 7.1(b) of the Plan), provided that (i) you do not receive any
consideration for the transfer and (ii) you furnish the Company’s Vice President
and Corporate Secretary with written notice of the transfer at least ten
(10) business days in advance of such transfer. Notwithstanding the foregoing,
any transfer of this Option may be delayed or prohibited if, in the sole
discretion of the Company’s Vice President and Corporate Secretary, such
transfer would violate, or would have the potential to violate, applicable law,
regulation or Company policy. If this Option is transferred pursuant to this
provision, it will continue to be subject to the same terms and conditions that
applied immediately prior to the transfer. This Option may be exercised by the
transferee only to the same extent that you could have exercised this Option had
no transfer occurred.

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12. Forfeiture of Option. You will forfeit all or a portion of this Option if
your employment terminates under the circumstances described below:

(i) If the Company or Subsidiary terminates your employment for Cause, including
without limitation a termination as a result of your violation of the Company’s
Code of Ethical Conduct, then the Company will immediately rescind the unvested
portion of this Option and any vested but unexercised portion of this Option and
you will immediately forfeit any and all rights you have remaining at such time
with respect to this Option. Also, you hereby agree and promise to deliver to
the Company immediately upon your Termination of Employment for Cause, Shares
(or, in the discretion of the Committee, cash) equal in value to the amount of
any profit you realized upon the exercise of any portion of this Option during
the 12-month period that occurs immediately prior to your Termination of
Employment for Cause.

(ii) If, after your Termination of Employment, the Committee determines in its
sole discretion that while you were a Company or Subsidiary employee you engaged
in activity that would have constituted grounds for the Company or Subsidiary to
terminate your employment for Cause, then the Company will immediately rescind
the unvested portion of this Option and any vested but unexercised portion of
this Option and you will immediately forfeit any and all rights you have
remaining on the date that the Committee makes such determination with respect
to this Option. Also, you hereby agree and promise to deliver to the Company
immediately upon the date the Committee determines that you could have been
terminated for Cause, Shares (or, in the discretion of the Committee, cash)
equal in value to the amount of any profit you realized upon the exercise of any
portion of this Option during the period that begins 12 months immediately prior
to your Termination of Employment and ends on the date the Committee determines
that you could have been terminated for Cause.

(iii) If the Committee determines in its sole discretion that at anytime after
your Termination of Employment and prior to the second anniversary of your
Termination of Employment you (A) disclosed confidential or proprietary
information related to any business of the Company or Subsidiary or (B) entered
into an employment or consultation arrangement (including any arrangement for
employment or service as an agent, partner, stockholder, consultant, officer or
director) with any entity or person engaged in a business and (1) such
employment or consultation arrangement would likely (in the Committee’s sole
discretion) result in the disclosure of confidential or proprietary information
related to any business of the Company or a Subsidiary to a business that is
competitive with any Company or Subsidiary business as to which you had access
to strategic or confidential information and (2) the Committee has not approved
the arrangement in writing, then any portion of this Option that you have not
exercised (whether vested or unvested) will immediately be rescinded and you
will forfeit any rights you have with respect to this Option as of the date of
the Committee’s determination. Also, you hereby agree and promise to deliver to
the Company, immediately upon the Committee’s determination date, Shares (or, in
the discretion of the Committee, cash) equal in value to the amount of any
profit you realized upon the exercise of any portion of this Option during the
period that begins 12 months immediately prior to your Termination of Employment
and ends on the date of the Committee’s determination.

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13. Adjustments. In the event of any stock split, reverse stock split, dividend
or other distribution (whether in the form of cash, Shares, other securities or
other property), extraordinary cash dividend, recapitalization, merger,
consolidation, split-up, spin-off, reorganization, combination, repurchase or
exchange of Shares or other securities, the issuance of warrants or other rights
to purchase Shares or other securities, or other similar corporate transaction
or event, the Committee shall adjust the number and kind of Shares covered by
this Option, the Exercise Price and other relevant provisions to the extent
necessary to prevent dilution or enlargement of the benefits or potential
benefits intended to be provided by this Option. Any such determinations and
adjustments made by the Committee will be binding on all persons.

14. Restrictions on Exercise. Exercise of this Option is subject to the
conditions that, to the extent required at the time of exercise:

(i) The Shares covered by this Option will be duly listed, upon official notice
of issuance, on the NYSE; and

(ii) A Registration Statement under the Securities Act of 1933 with respect to
the Shares will be effective or an exemption from registration will apply.

The Company will not be required to deliver any Shares until all applicable
federal and state laws and regulations have been complied with and all legal
matters in connection with the issuance and delivery of the Shares have been
approved by the Company’s legal counsel.

15. Disposition of Securities. By accepting this Option, you acknowledge that
you have read and understand the Company’s Insider Trading Policy and are aware
of and understand your obligations under federal securities laws with respect to
trading in the Company’s securities. You also hereby agree not to use the
Company’s “cashless exercise” program (or any successor program) at any time
when you possess material nonpublic information with respect to the Company
(including Subsidiaries) or when using the program would otherwise result in a
violation of applicable securities law. The Company has the right to recover, or
receive reimbursement for, any compensation or profit realized on the exercise
of this Option or by the disposition of Shares received upon exercise of this
Option to the extent that the Company has a right of recovery or reimbursement
under applicable securities laws.

16. Plan Terms Govern. The vesting and exercise of this Option, the disposition
of any Shares received upon exercise of this Option, and the treatment of any
gain on the disposition of such Shares are subject to the terms of the Plan and
any rules that the Committee prescribes. The Plan document, as amended from time
to time, is incorporated into this Terms and Conditions document. Capitalized
terms used herein are defined in the Plan. If there is any conflict between the
terms of the Plan and these Terms and Conditions, the Plan’s terms govern. By
accepting this Option Award, you hereby acknowledge receipt of the Plan, as in
effect on the Grant Date.

17. Personal Data. To comply with applicable law and to administer this Option
appropriately, the Company and its agents may accumulate, hold and process your
personal data and/or “sensitive personal data” within the meaning of applicable
law. Such data includes, but is not limited to, the information provided to you
as part of the grant package and any changes

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thereto (e.g., details of options awarded, vested, unvested or expired), other
appropriate personal and financial data about you (e.g., name, home address,
telephone number, date of birth, social security number, nationality and job
title), and information about your participation in the Plan and Shares obtained
under the Plan from time to time. By accepting this Option, you hereby give your
explicit consent to the Company’s accumulating and processing personal data
and/or sensitive personal data as necessary or appropriate for Plan
administration. If applicable, you also hereby give your explicit consent to the
Company’s transfer of personal data and/or sensitive personal data outside the
country in which you work or reside and to the United States. The legal persons
for whom your personal data are intended include the Company, its Subsidiaries
(or former Subsidiaries as are deemed necessary), the outside Plan
administrator, and any other person that the Company retains or utilizes for
compensation planning or Plan administration purposes. You have the right to
review and correct your personal data by contacting your local Human Resources
Representative. You hereby acknowledge your understanding that the transfer of
the information outlined here is important to Plan administration and that
failure to consent to the transmission of such information may limit or prohibit
your participation in the Plan.

18. No Contract of Employment or Promise of Future Grants. By accepting this
Option, you agree that you are bound by the terms of the Plan and these Terms
and Conditions and acknowledge that this Option is granted in the Company’s sole
discretion and is not considered part of any employment contract or your
ordinary or expected salary or other compensation. You understand that the grant
of options under the Plan is voluntary and occasional and does not create any
contractual or other right to receive future grants of any options, or benefits
in lieu of any options, even if options have been granted repeatedly in the
past. This Option and any gains received hereunder are not considered part of
your salary or compensation for purposes of any pension or retirement benefits
or for purposes of calculating any termination, severance, redundancy,
resignation, end of service payments, bonuses, long-service awards, life or
accident insurance benefits or similar payments. If the Company or Subsidiary
terminates your employment for any reason, you agree that you will not be
entitled to damages for breach of contract, dismissal or compensation for loss
of office or otherwise to any sum, Shares, Options or other benefits to
compensate you for the loss or diminution in value of any actual or prospective
rights, benefits or expectation under or in relation to the Plan.

19. Limitations. Nothing in these Terms and Conditions or the Plan grants to you
any right to continued employment with the Company or any Subsidiary or to
interfere in any way with the Company or Subsidiary’s right to terminate your
employment at any time and for any reason. Payment of Shares is not secured by a
trust, insurance contract or other funding medium, and you do not have any
interest in any fund or specific Company asset by reason of this Option. You
have no rights as a stockholder of the Company pursuant to this Option until
Shares are actually delivered to you.

20. Entire Agreement and Amendment. These Terms and Conditions and the Plan
constitute the entire understanding between you and the Company regarding this
Option. These Terms and Conditions supersede any prior agreements, commitments
or negotiations concerning this Option. These Terms and Conditions may not be
modified, altered or changed except by the Committee (or its delegate) in
writing and pursuant to the terms of the Plan.

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21. Severability. The invalidity or unenforceability of any provision of these
Terms and Conditions will not affect the validity or enforceability of the other
provisions of these Terms and Conditions, which will remain in full force and
effect. Moreover, if any provision is found to be excessively broad in duration,
scope or covered activity, the provision will be construed so as to be
enforceable to the maximum extent compatible with applicable law.

22. Code Section 409A Compliance. Notwithstanding any other provision of these
Terms and Conditions to the contrary, in the event that all or a portion of this
Option becomes subject to Code Section 409A, the provisions contained in
Section 7.12 of the Plan shall govern and shall supersede any applicable
provision of these Terms and Conditions.

23. Acceptance. By signing and returning the Non-Competition, Non-Solicitation,
and Confidentiality Agreement described in Section 1, you accept this Option and
agree to the following:

(i) You have carefully read, fully understand and agree to all of the terms and
conditions contained in the Plan and these Terms and Conditions; and

(ii) You understand and agree that the Plan and these Terms and Conditions
constitute the entire understanding between you and the Company regarding this
Option, and that any prior agreements, commitments or negotiations concerning
this Option are replaced and superseded.

If you do not sign and return the Non-Competition, Non-Solicitation, and
Confidentiality Agreement described in Section 1 to the Company, such that the
Company is in actual receipt of the signed Agreement by January 30, 2009, you
will be deemed to have not accepted this Option, the Company will cancel this
Option effective as of such date and you will forfeit any rights hereunder.