CARDINAL HEALTH INC (Form: 10-K, Received: 08/26/2010 16:02:54)

Fiscal Year Ended June 30,

(in millions)

Anti-dilutive securities

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2010

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-11373

LOGO

CARDINAL HEALTH, INC.

(Exact name of registrant as specified in its charter)


OHIO		31-0958666
*(State or other jurisdiction of* *incorporation or organization)*		*(I.R.S. Employer* *Identification No.)*

7000 CARDINAL PLACE, DUBLIN, OHIO		43017
*(Address of principal executive offices)*		*(Zip Code)*

(614) 757-5000

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of Class		Name of Each Exchange on Which Registered
COMMON SHARES (WITHOUT PAR VALUE)		NEW YORK STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act:

None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer þ		Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)		Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ

The aggregate market value of voting stock held by non-affiliates of the registrant on December 31, 2009, based on the closing price on December 31, 2009, was $11,647,605,557.

The number of registrant’s Common Shares outstanding as of August 18, 2010, was as follows: Common Shares, without par value: 351,163,010.

Documents Incorporated by Reference:

Portions of the registrant’s Definitive Proxy Statement to be filed for its 2010 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS


ITEM		Page
	Important Information Regarding Forward-Looking Statements	1

	PART I
1.	Business	2
1A.	Risk Factors	10
1B.	Unresolved Staff Comments	14
2.	Properties	14
3.	Legal Proceedings	15
4.	Removed and Reserved	15

	PART II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
6.	Selected Financial Data	19
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
7A.	Quantitative and Qualitative Disclosures About Market Risk	36
8.	Financial Statements and Supplementary Data	38
9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	81
9A.	Controls and Procedures	81
9B.	Other Information	83

	PART III
10.	Directors, Executive Officers and Corporate Governance	83
11.	Executive Compensation	83
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	83
13.	Certain Relationships and Related Transactions, and Director Independence	85
14.	Principal Accounting Fees and Services	85

	PART IV
15.	Exhibits, Financial Statement Schedules	86
	Signatures	98

Important Information Regarding Forward-Looking Statements

Portions of this Form 10-K (including information incorporated by reference) include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Many forward-looking statements appear in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but there are others throughout this document, which may be identified by words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “will,” “should,” “could,” “would,” “project,” “continue,” and similar expressions, and include statements reflecting future results or guidance, statements of outlook and tax accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these risks and uncertainties are described below in “Item 1A—Risk Factors” and in Exhibit 99.1 to this Form 10-K. Forward-looking statements in this document speak only as of the date of this document. Except to the extent required by applicable law, we undertake no obligation to update or revise any forward-looking statement.

PART I

Item 1:

Business

General

Cardinal Health, Inc. is an Ohio corporation formed in 1979. As used in this report, “we,” “our,” “us” and similar pronouns refer to Cardinal Health, Inc. and its subsidiaries, unless the context requires otherwise. We are a global healthcare solutions company providing products and services that help hospitals, physician offices and pharmacies reduce costs, improve safety and productivity, and deliver better care to patients. Except as otherwise specified, information in this Annual Report on Form 10-K is provided as of June 30, 2010, which is the end of our 2010 fiscal year.

Spin-Off of CareFusion Corporation

On August 31, 2009, we separated the clinical and medical products businesses from our other businesses through a pro rata distribution to shareholders of 81% of the then outstanding common stock of a wholly-owned subsidiary, CareFusion Corporation (“CareFusion”). We refer to this transaction as the “Spin-Off.” CareFusion’s product lines are in the areas of intravenous, infusion, medication and supply dispensing, respiratory care, infection prevention and surgical instruments. We retained 19% of CareFusion common stock, which we are required to dispose of before August 31, 2014, pursuant to the private letter ruling we received from the Internal Revenue Service (the “IRS”) in connection with the Spin-Off. As of June 30, 2010, we owned approximately 30.5 million CareFusion shares. As part of the Spin-Off, Cardinal Health and CareFusion entered into a separation agreement and various other agreements relating to the separation, including a transition services agreement, a tax matters agreement, an employee matters agreement, intellectual property agreements and certain other commercial agreements.

Business Segments

For fiscal 2009, we reported financial information in three segments: Healthcare Supply Chain Services, Clinical and Medical Products, and All Other. From July 1, 2009 to August 31, 2009, we reported financial information in three different segments: Pharmaceutical, Medical and CareFusion. The Pharmaceutical segment included the businesses that were previously within the Healthcare Supply Chain Services segment that distributed pharmaceutical, radiopharmaceutical and over-the-counter healthcare products, as well as the businesses previously within the All Other segment. The Medical segment included the remaining businesses within the Healthcare Supply Chain Services segment and certain surgical and exam gloves, surgical drapes and apparel and fluid management businesses that were previously within the Clinical and Medical Products segment. The CareFusion segment included the businesses previously within the Clinical and Medical Products segment but not the above-referenced surgical and exam gloves, surgical drapes and apparel and fluid management businesses. All businesses in the CareFusion segment were part of the Spin-Off.

Once the Spin-Off was completed, our remaining businesses were organized into our current two segments: Pharmaceutical and Medical. The following business discussion is based on the two segments as they were structured for fiscal 2010.

Pharmaceutical Segment

The Pharmaceutical segment:

•

distributes branded and generic pharmaceutical, over-the-counter healthcare, and consumer products through its pharmaceutical distribution business;

•

operates nuclear pharmacies and cyclotron facilities that prepare and deliver radiopharmaceuticals for use in nuclear imaging and other procedures in hospitals and clinics;

•

distributes specialty pharmaceutical products and provides third-party logistics support services to manufacturers; and

•

franchises retail pharmacies under the Medicine Shoppe ^® and Medicap ^® brands, and provides pharmacy services to hospitals and other healthcare facilities.

The pharmaceutical distribution business is a full-service wholesale distributor to retail customers (including chain and independent drug stores and pharmacy departments of supermarkets and mass merchandisers), hospitals, and alternate care providers (including mail order pharmacies) located throughout the United States and in Puerto Rico. Pharmaceutical distribution maintains prime vendor relationships that streamline the purchasing process resulting in greater efficiency and lower costs for our customers. Pharmaceutical distribution also helps pharmaceutical manufacturers with services including distribution, inventory management, data/reporting, new product launch support, and contract and chargeback administration.

The pharmaceutical distribution business generates gross margin primarily when the aggregate selling price to our customers exceeds the aggregate cost of products sold, net of manufacturer cash discount, branded manufacturer margin, and generic manufacturer margin.

“ Manufacturer cash discounts ” are price reductions that manufacturers may offer to us for prompt payment of purchased products.

“ Branded manufacturer margin ” (also referred to as “branded margin”) refers to compensation amounts under distribution service agreements with manufacturers and to pharmaceutical price appreciation. Compensation under the distribution service agreements may be a fee based on volume with or without pharmaceutical price appreciation. A manufacturer may increase its published price for a product after we have purchased that product for inventory. Our contract price for branded pharmaceutical products to customers is based on the manufacturer’s published price at the time of sale. As such, inventory sold following a manufacturer price increase will be based on the higher manufacturer price. “ Pharmaceutical price appreciation ” refers to amounts we earn from selling inventory at these increased prices.

“ Generic manufacturer margin ” (also referred to as “generic margin”) refers to price discounts, rebates and other incentives we receive from manufacturers of generic pharmaceuticals. Our earnings on generic pharmaceuticals generally are highest during the period immediately following the initial launch of a generic product because generic pharmaceutical selling prices tend to decline over time, although this may vary.

Bulk and Non-bulk Customers . The Pharmaceutical segment differentiates between bulk and non-bulk customers. Bulk customers consist of retail chain customers’ centralized warehouse operations and customers’ mail order businesses. All other customers are classified as non-bulk customers. A retail chain pharmacy customer may be both a bulk customer with respect to its warehouse operations and a non-bulk customer with respect to its retail stores.

Bulk customers can process large quantities of products in central locations. Substantially all deliveries to bulk customers consist of products shipped in the same form that we receive them from the manufacturer; a small portion of deliveries to bulk customers are broken down into smaller units prior to shipping. In contrast, non-bulk customers require more complex servicing. For non-bulk customers, we may receive inventory in large or full case quantities and break it down into smaller quantities, warehouse the product for a longer period of time, pick individual products specific to a customer’s order, and deliver that smaller order to a customer location.

Bulk customers generate significantly lower segment profit as a percentage of revenue than non-bulk customers. Bulk customers receive lower pricing on sales of the same products than non-bulk customers due to volume pricing in a competitive market and due to lower costs related to the fewer services we provide. In

addition, sales to bulk customers in aggregate generate higher segment cost of products sold as a percentage of revenue than sales to non-bulk customers, because bulk customers’ orders consist almost entirely of higher cost branded products. The higher segment cost of products sold as a percentage of revenue for bulk customers is also driven by the impact of branded manufacturer margin and manufacturer cash discounts. Branded manufacturer margin is lower due to the shorter time that products sold to bulk customers are held in inventory by us, allowing less opportunity for pharmaceutical price appreciation. Segment distribution, selling, general and administrative (“SG&A”) expenses as a percentage of revenue from bulk customers are substantially lower than from non-bulk customers because deliveries to bulk customers require substantially fewer services to be rendered by us than deliveries to non-bulk customers.

The following table shows the revenues, segment expenses, segment profit and segment profit as a percentage of revenue for bulk and non-bulk customers for fiscal 2010, 2009 and 2008.


(in millions)	2010			2009 (2)			2008 (2)
Non-bulk customers:
Revenue from non-bulk customers	$	45,795.4		$	44,134.7		$	42,199.7
Segment expenses allocated to non-bulk customers (1)		44,908.4			43,272.9			41,335.6
Segment profit from non-bulk customers (1)		887.0			861.8			864.1
Segment profit from non-bulk customers as a percentage of revenue from non-bulk customers (1)		1.94	%		1.95	%		2.05	%
Bulk customers:
Revenue from bulk customers	$	43,994.5		$	43,728.2		$	37,298.6
Segment expenses allocated to bulk customers (1)		43,879.7			43,554.3			37,140.3
Segment profit from bulk customers (1)		114.8			173.9			158.3
Segment profit from bulk customers as a percentage of revenue from bulk customers (1)		0.26	%		0.40	%		0.42	%

(1)

Segment expenses and profit required complex and subjective estimates and allocations based upon assumptions, past experience and judgment that we believe are reasonable. In addition, amounts do not include the impact of last-in, first-out (“LIFO”) provisions, if any. We had no LIFO provisions in fiscal 2010, 2009 and 2008.

(2)	During fiscal 2010, we revised some of the estimates used when allocating expenses between non-bulk customers and bulk customers. Prior period information has been adjusted to reflect this change.

See Note 16 to the “Notes Consolidated Financial Statements” for Pharmaceutical segment revenue, profit and assets for fiscal 2010, 2009 and 2008.

Medical Segment

The Medical segment distributes a broad range of medical, surgical and laboratory products to hospitals, surgery centers, laboratories, physician offices and other healthcare providers. This segment also develops, manufactures and sources our own line of medical and surgical products. These products include: sterile and non-sterile procedure kits; single-use surgical drapes, gowns and apparel; exam and surgical gloves; and fluid suction and collection systems. Our medical and surgical products are sold directly or through third-party distributors in the United States, Canada, Europe, South America and the Asia/Pacific region.

See Note 16 to the “Notes Consolidated Financial Statements” for Medical segment revenue, profit and assets for fiscal 2010, 2009 and 2008.

Acquisitions and Divestitures

In the past five fiscal years, we completed the following two significant acquisitions, both of which were transferred to CareFusion as part of the Spin-Off.

Consideration Paid

Date (1)

Company

Location

Line of Business

Cash

Stock
Options
Converted (2)

(Amounts in millions)

June 21, 2007

VIASYS Healthcare Inc. (“VIASYS”)

Conshohocken, Pennsylvania

Respiratory, neurology, medical disposable and orthopedic products

1,526

(3)

0.1

May 12, 2008

Enturia Inc. (“Enturia”)

Leawood, Kansas

Infection prevention products

490

(4)

0.0

(1)	Represents the date we became the majority shareholder.

(2)	As a result of the acquisition, the outstanding stock options of the acquired company were converted into options to purchase Common Shares issued by us. This column represents the number of our Common Shares subject to converted stock options immediately following conversion.

(3)	Includes the assumption of approximately $54 million in debt; also includes approximately $88 million of shares under equity compensation plans in July 2007.

(4)	Includes the assumption of approximately $5 million in debt.

We also completed several smaller acquisitions during the last five fiscal years, including:

•

during fiscal 2006, purchasing the wholesale pharmaceutical, health and beauty and related drugstore products distribution business of The F. Dohmen Co. and certain of its subsidiaries, and the remaining shares of Source Medical Corporation, our Canadian joint venture;

•

during fiscal 2007, purchasing SpecialtyScripts, LLC; and

•

during fiscal 2009, purchasing Borschow Hospital & Medical Supplies, Inc.

On June 9, 2010, we entered into an agreement to acquire Healthcare Solutions Holding, LLC, which provides specialty healthcare services. On July 15, 2010, we completed that acquisition for a $517 million cash payment. The acquisition agreement also includes earn-out payments of up to $150 million over the next three years.

We completed several divestiture transactions during the past five fiscal years, including:

•

during fiscal 2007, selling our former Pharmaceutical Technologies and Services segment, other than certain generic-focused businesses, for approximately $3.2 billion in cash; our healthcare marketing services business; and our United Kingdom-based Intercare pharmaceutical distribution business.

•

during fiscal 2010, consummating the Spin-Off of CareFusion Corporation; and selling SpecialtyScripts, LLC and our United Kingdom-based Martindale injectable manufacturing business.

Customers

Our largest customers, Walgreen Co. (“Walgreens”) and CVS Caremark Corporation (“CVS”), accounted for approximately 24% and 22%, respectively, of our revenue for fiscal 2010. The aggregate of our five largest customers, including Walgreens and CVS, accounted for approximately 57% of our revenue for fiscal 2010.

We have agreements with group purchasing organizations (“GPOs”) that act as agents to negotiate vendor contracts on behalf of their members. Our two largest GPO relationships in terms of member revenue are with

Novation, LLC, and Premier Purchasing Partners, L.P. Arrangements with these two GPOs accounted for approximately 15% of our revenue for fiscal 2010. Although GPO vendor selections may influence member sourcing decisions, GPO members generally are not required to comply with those vendor selections. Accordingly, we believe that the loss of an agreement with a GPO would not cause the loss of sales to all members of the GPO.

Suppliers

We rely on many different suppliers. Products obtained from our five largest suppliers accounted for an aggregate of approximately 20% of our revenue during fiscal 2010, but no single supplier’s products accounted for more than 6% of that revenue. Overall, we believe our relationships with our suppliers are good. The loss of some suppliers could adversely affect our results of operations and financial condition if alternative sources were unavailable at reasonable prices.

The Pharmaceutical distribution business is a party to distribution service agreements with pharmaceutical manufacturers. These agreements generally have terms ranging from one year with an automatic renewal feature to five years. Generally, these agreements are terminable before they expire only if the parties mutually agree, if there is an uncured breach of the agreement, or if one party is the subject of a bankruptcy filing or similar insolvency event. Some agreements allow the manufacturer to terminate the agreement without cause within a defined notice period.

Our Pharmaceutical segment’s nuclear pharmacy services business dispenses several products prepared using a particular radioisotope. At the present time, it is difficult to acquire sufficient quantities of that radioisotope from third party suppliers because of a continued and prolonged shortage of a critical raw material used to derive that radioisotope from two nuclear reactors, which are experiencing prolonged downtimes. Based on information obtained from parties involved with the two affected nuclear reactors, we anticipate the supply of raw material to normalize in the first half of fiscal 2011.

Competition

We operate in a highly competitive environment in the distribution of pharmaceuticals and related healthcare services. We also operate in a highly competitive environment in the development, manufacturing and distribution of medical and surgical products. We compete on many levels, including service offerings, support services, breadth of product lines, and price.

In the Pharmaceutical segment, we compete with two other national, full-line wholesale distributors (McKesson Corporation and AmerisourceBergen Corporation) and a number of regional wholesale distributors, self-warehousing chains, direct selling manufacturers, specialty distributors, third-party logistics companies, and nuclear pharmacies, among others. In addition, the Pharmaceutical segment has experienced competition from a number of organizations offering generic pharmaceuticals, including telemarketers.

In the Medical segment, we compete with many different distributors, including Owens & Minor, Inc., Thermo Fisher Scientific Inc., PSS World Medical, Inc., Henry Schein, Inc., and Medline Industries, Inc. In addition, we compete with a number of regional medical products distributors and with third-party logistics companies. Competitors of the Medical segment’s development and manufacturing business include Kimberly-Clark Corporation, Ansell Limited, DeRoyal Industries Inc., Medline Industries, Inc., and Mölnlycke Health Care.

Employees

As of June 30, 2010, we had approximately 22,600 employees in the United States and approximately 8,600 employees outside of the United States. Overall, we consider our employee relations to be good.

Intellectual Property

We rely on a combination of trade secret, patent, copyright and trademark laws, nondisclosure and other contractual provisions, and technical measures to protect our products, services and intangible assets. We also operate under licenses for certain proprietary technologies, and in certain instances we license our technologies to third parties. All of these proprietary rights are important to our ongoing operations. We enforce our intellectual property rights when they are infringed by others, and will continue to do so, where appropriate.

We have applied in the United States and other countries for registration of a number of trademarks and service marks. Some of our marks are registered, but our applications may not always be granted. We also hold common law rights in various trademarks and service marks.

We hold patents relating to aspects of our distribution operations, including our nuclear pharmacy products and service offerings. We also hold patents relating to medical and surgical products and devices, such as fluid suction and irrigation devices; surgical waste management systems; surgical and medical examination gloves; surgical drapes, gowns and facial protection products; and patient temperature management products.

We have a number of pending patent applications in the United States and other countries, and we intend to pursue additional patents as appropriate. We may not always obtain the patents for which we apply. We do not consider any particular patent, trademark, license, franchise or concession to be material to our overall business.

Regulatory Matters

Our business is highly regulated in the United States at both the federal and state level and in foreign countries. Depending upon their specific business and where they distribute, manufacture and sell their products, our subsidiaries may be subject to regulation by government entities including:

•

the U.S. Drug Enforcement Administration (the “DEA”),

•

the U.S. Food and Drug Administration (the “FDA”),

•

the U.S. Nuclear Regulatory Commission (the “NRC”),

•

the U.S. Department of Health and Human Services (“HHS”),

•

state boards of pharmacy,

•

state controlled substance agencies,

•

state health departments, insurance departments or other comparable state agencies, and

•

foreign agencies that are comparable to those listed above.

These regulatory agencies have a variety of civil, administrative and criminal sanctions at their disposal. They can require us to suspend distribution of products and controlled substances or initiate product recalls; they can seize products or impose significant criminal, civil and administrative sanctions; and they can seek injunctions to halt the manufacture and distribution of products.

Distribution. The DEA, FDA and various state authorities regulate the marketing, purchase, storage and distribution of pharmaceutical products and controlled substances under various state and federal statutes including the Prescription Drug Marketing Act of 1987. Wholesale distributors of controlled substances must hold valid DEA registrations and state-level licenses, meet various security and operating standards, and comply with the Controlled Substances Act and its accompanying regulations governing the sale, marketing, packaging, storage and distribution of controlled substances.

Manufacturing and marketing. Our subsidiaries that manufacture medical devices are subject to regulation by the FDA and comparable foreign agencies including regulations regarding compliance with good manufacturing practices and quality systems. In addition, our Medical segment’s international manufacturing operations may be subject to local certification requirements.

The FDA and other domestic and foreign governmental agencies administer requirements covering the design, testing, safety, effectiveness, manufacture, labeling, promotion and advertising, distribution and post-market surveillance of certain of our manufactured products. We need specific approval or clearance from regulatory authorities before we can market and sell many of our products in particular countries. Even after we obtain approval or clearance to market a product, the product and our manufacturing processes are subject to continued regulatory review.

To assess and facilitate compliance with federal, state and foreign regulatory requirements, we routinely review our quality and compliance systems to evaluate their effectiveness and to identify areas for improvement or remediation. As part of our quality review, we assess the suppliers of raw materials, components and finished goods that are incorporated into the medical devices we manufacture. In addition, we conduct quality management reviews designed to highlight key issues that may affect the quality of our products and services. From time to time, we may determine that products we manufacture or market do not meet our specifications, regulatory requirements, or published standards. When we identify a quality or regulatory issue, we investigate and take appropriate corrective action, such as withdrawing the product from the market, correcting the product at the customer location, revising product labeling, and notifying customers.

Nuclear pharmacies and related businesses. Our nuclear pharmacies and cyclotron facilities require licenses or permits from the NRC, the radiologic health agency or department of health of each state in which we operate, and the state board of pharmacy. In addition, the FDA regulates cyclotron facilities. The FDA issued regulations, effective December 11, 2011, establishing current Good Manufacturing Practices for positron emission tomography (“PET”) drugs.

Prescription Drug Pedigree Tracking

State and federal agencies are concerned about preventing the introduction of counterfeit, diverted, adulterated or mislabeled pharmaceuticals into the pharmaceutical supply chain. Some states have adopted or are considering laws and regulations intended to protect the integrity of the pharmaceutical distribution system while other government agencies are currently evaluating their options. The FDA Amendments Act of 2007 requires the FDA to establish standards to identify and validate technologies for securing the pharmaceutical supply chain against counterfeit drugs. These standards may include track-and-trace or authentication technologies, such as radio frequency identification devices and other similar technologies. In March 2010, the FDA issued guidance establishing standardized numerical identifiers (“SNI”) for prescription pharmaceutical packages.

In December 2006, we entered into a settlement to resolve a civil investigation by the New York Attorney General’s Office focusing on sales and purchases of prescription pharmaceuticals in the secondary market. Pursuant to the settlement, we implemented a number of reforms within the pharmaceutical distribution business, including requirements that customers who are wholesalers certify their compliance with our wholesaler safe product practices.

Healthcare Fraud and Abuse Laws

We are subject to extensive and frequently changing laws and regulations relating to healthcare fraud and abuse. Laws and regulations generally prohibit us (and others in our industry) from soliciting, offering, receiving or paying any compensation in order to induce someone to order or purchase items or services that are in any way paid for by Medicare, Medicaid or other government-sponsored healthcare programs. We also cannot submit or cause to be submitted any fraudulent claim for payment by the federal government. Certain of our subsidiaries also maintain contracts with the federal government and are subject to regulatory requirements relating to government contractors.

Health Information Practices

Services and products provided by some of our businesses involve access to patient identifiable healthcare information. In the past few years, federal and state officials have focused on the questions of how patient

identifiable healthcare information should be handled, which entities should compile that information, and how that work should proceed. Changes in legislation such as the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its accompanying regulations may affect how some information services or products are provided. The Health Information Technology for Economic and Clinical Health Act, adopted in February 2009, augmented HIPAA by increasing existing healthcare privacy requirements, including expanding HIPAA’s reach to cover additional entities, requiring certain notifications if there is a breach of patient information and increasing penalties associated with noncompliance. In addition, certain jurisdictions where we do business regulate personal data protection and how information services or products are provided.

Franchising Laws

Our franchising operations, through Medicine Shoppe International, Inc. and Medicap Pharmacies Incorporated (collectively, “Medicine Shoppe”), are subject to regulation by the Federal Trade Commission. In addition, many states have laws that regulate the franchisor-franchisee relationship.

Environmental Laws

We are subject to various federal, state and local environmental laws and we have made, and will continue to make, necessary expenditures to comply with applicable laws. At the present time, we are participating in cleaning up environmental contamination at several sites, none of which are material to us.

Health and Safety Laws

We are subject to various federal, state and local laws, regulations and recommendations, both in the United States and other countries, relating to safe working conditions, laboratory and manufacturing practices, and the use, transportation and disposal of hazardous or potentially hazardous substances.

Laws Relating to Foreign Trade

Various U.S. and international laws and regulations require us to abide by standards relating to the import and export of finished goods, raw materials and supplies and the handling of information. We also must comply with various export control and trade embargo laws and regulations, which may require licenses or other authorizations for transactions within some countries or with some counterparties.

Similarly, we are subject to laws and regulations concerning the conduct of our foreign operations, including the U.S. Foreign Corrupt Practices Act, foreign anti-bribery laws and laws pertaining to the accuracy of internal books and records. These laws generally prohibit companies and their intermediaries from making improper payments to non-U.S. government officials for the purpose of obtaining or retaining business. We operate in many parts of the world that have experienced some governmental corruption.

Other Information

Our distribution businesses generally are not required by our customers to maintain particular inventory levels other than as needed to meet service level requirements. Certain supply contracts with U.S. government entities require us to maintain sufficient inventory to meet emergency demands, but we do not believe those requirements materially affect inventory levels.

Our customer return policies generally require that the product be physically returned, subject to restocking fees. We only allow customers to return products that can be added back to inventory and resold at full value, or that can be returned to vendors for credit.

We offer market payment terms to our customers.

Revenue and Long-Lived Assets by Geographic Area

See Note 16 to the “Notes Consolidated Financial Statements” for revenue and long-lived assets by geographic area.

Available Information and Exchange Certifications

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports are available free of charge on our website (www.cardinalhealth.com), under the “Investors—Financials/SEC filings” caption, as soon as reasonably practicable after we electronically file them with, or furnish them to, the Securities and Exchange Commission (the “SEC”).

You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website (www.sec.gov) where you can search for annual, quarterly and current reports, proxy and information statements, and other information regarding us and other public companies.

CareFusion filed a registration statement on Form 10 (File No. 001-34273) with the SEC that discloses information regarding the Spin-Off and CareFusion.

Item 1A:

Risk Factors

The risks described below could materially and adversely affect our results of operations, financial condition, liquidity and cash flows. These are not the only risks we face. Our businesses also could be affected by risks that we are not presently aware of or that we currently consider immaterial to our operations.

We could suffer the adverse effects of competitive pressures.

As described in greater detail in the discussion of our business in Item 1 above, we operate in markets that are highly competitive. Because of competition, our businesses face continued pricing pressure from our customers and suppliers. If we are unable to offset margin reductions caused by these pricing pressures through steps such as enhanced cost control measures, our results of operations and financial condition could be adversely affected.

In addition, in recent years, the healthcare industry has been subject to increasing consolidation. If this consolidation trend continues among our customers and suppliers, it could give the resulting enterprises greater bargaining power, which may adversely impact our results of operations.

We have a few large customers that generate a significant amount of our revenue.

As described in greater detail in the discussion of our business in Item 1 above, our sales and credit concentration is significant. For example, Walgreens and CVS accounted for approximately 24% and 22%, respectively, of our revenue for fiscal 2010. The aggregate of our five largest customers, including Walgreens and CVS, accounted for approximately 57% of our revenue for fiscal 2010. In addition, Walgreens and CVS accounted for 32% and 21%, respectively, of our gross trade receivable balance at June 30, 2010. If one or more of our large customers default in payment, terminate or do not renew contracts, or significantly reduce their purchases of our products, our results of operations and financial condition could suffer.

In addition, approximately 15% of our revenue for fiscal 2010 was derived through the contractual arrangements established with two GPOs, Novation and Premier. GPO members generally are not required to comply with GPO vendor selections. Still, the loss of an agreement with a GPO could cause us to lose customers, which may adversely affect our results of operations and financial condition.

Our Pharmaceutical segment’s margin may be affected by prices established by manufacturers or market forces that are beyond our control.

As described in greater detail in the discussion of our business in Item 1, we generate a portion of our branded manufacturer margin from pharmaceutical price appreciation. If branded manufacturers increase prices less frequently or by smaller amounts, or restrict the amount of inventory available to us, we will earn less branded manufacturer margin.

In addition, prices for generic pharmaceuticals distributed by our pharmaceutical distribution business tend to decline over time, which could have an adverse effect on our generic manufacturer margin.

The U.S. healthcare environment is changing in many ways, some of which may not be favorable to us, as a result of recent federal healthcare legislation.

Our products and services are primarily intended to function within the current structure of the healthcare industry in the United States. In recent years, the healthcare industry has undergone significant changes designed to control costs. The use of managed care has increased; Medicare and Medicaid reimbursement levels have declined; distributors, manufacturers, healthcare providers and pharmacy chains have consolidated; and large, sophisticated purchasing groups have become more prevalent.

In March 2010, Congress approved, and the President signed into law, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (collectively the “Healthcare Reform Acts”). Among other things, the Healthcare Reform Acts seek to expand health insurance coverage to approximately 32 million uninsured Americans. Many of the significant changes in the Healthcare Reform Acts do not take effect until 2014, including a requirement that most Americans carry health insurance. We expect expansion of access to health insurance to increase the demand for our products and services, but other provisions of the Healthcare Reform Acts could affect us adversely. The Healthcare Reform Acts contain many provisions designed to generate the revenues necessary to fund the coverage expansions and to reduce costs of Medicare and Medicaid. Beginning in 2013, each medical device manufacturer will have to pay a tax in an amount equal to 2.3% of the price for which the manufacturer sells its medical devices. We manufacture and sell devices that will be subject to this tax. Additionally, the Healthcare Reform Acts changed the federal upper payment limit for Medicaid reimbursement to no less than 175% of the average weighted manufacturer’s price (“AMP”) from 250% of the lowest average manufacturer’s price for generic pharmaceuticals. The AMP provision is expected to become effective in October 2010. We could be adversely affected by, among other things, changes in the delivery or pricing of or reimbursement for pharmaceuticals, medical devices, or healthcare services.

Our business requires consistent, diligent and rigorous compliance with regulatory and licensing requirements.

The healthcare industry is highly regulated. As described above in greater detail in the discussion of our business in Item 1, we are subject to regulation in the United States at both the federal and state level and in foreign countries. Many of our subsidiaries are required to register for permits or licenses with, and to comply with operating and security standards of, regulatory agencies. If we fail to comply with these regulatory requirements, or if allegations are made that we fail to comply, our results of operations and financial condition could suffer.

•

To lawfully operate our businesses, we are required to hold permits, licenses and other regulatory approvals from governmental bodies. Failure to maintain or renew, or obtain without significant delay, necessary permits, licenses or approvals could have an adverse effect on our results of operations and financial condition. For example, in fiscal 2008, the DEA suspended licenses to distribute controlled substances held by three of our distribution centers for almost a year because of alleged defects in our controlled substance anti-diversion controls.

•

Products that we manufacture, distribute or market are required to comply with regulatory requirements. Noncompliance or concerns over noncompliance could result in product corrective actions, recalls or seizures, warning letters, monetary sanctions, injunctions to halt manufacture and distribution of products, civil or criminal sanctions, governmental refusal to grant approvals, restrictions on operations, withdrawal of existing approvals and third party claims.

•

We are required to comply with laws and regulations relating to healthcare fraud and abuse. The scope and applicability of these laws is not always clear. If we fail to comply with them, we could be subject

to federal or state government investigations and resulting civil and criminal penalties including the loss of licenses or the ability to participate in Medicare, Medicaid and other federal and state healthcare programs. The scope or requirements of these laws or regulations may be interpreted or applied by a regulator, prosecutor or judge in a manner that could negatively impact or require us to change our operations.

We could be subject to adverse changes in the tax laws or challenges to our tax positions.

We are a large multinational corporation with operations in the United States and many foreign countries. As a result, we are subject to the tax laws and regulations of many jurisdictions. From time to time, legislative initiatives are proposed, including proposals to repeal LIFO (last-in, first-out) treatment of inventory, that could adversely affect our tax positions, effective tax rate or tax payments. Tax laws and regulations are extremely complex and subject to varying interpretations. Tax authorities have challenged some of our tax positions and it is possible that they will challenge others. We may not be able to defend these challenges successfully, which may adversely affect our effective tax rate or tax payments.

Our business and operations depend on the proper functioning of information systems and critical facilities.

We rely on information systems to obtain, rapidly process, analyze and manage data to:

•

facilitate the purchase and distribution of thousands of inventory items from numerous distribution centers;

•

receive, process and ship orders on a timely basis;

•

manage the accurate billing and collections for thousands of customers;

•

process payments to suppliers;

•

facilitate the manufacturing and assembly of medical products; and

•

generate financial transactions and information.

Our business also depends on the proper functioning of our critical facilities, including our national logistics center. Our results of operations could be adversely affected if these systems or facilities are interrupted, damaged by unforeseen events or actions of third parties, or fail for any extended period of time.

The Medical segment is working on a medical business transformation project, which includes a new information system for supply chain and manufacturing related processes. The Medical segment is planning to transition selected processes to the new system throughout fiscal 2012 and 2013. If the system is not effectively implemented or fails to operate as intended, it could adversely affect the Medical segment’s supply chain and manufacturing operations and the effectiveness of our internal control over financial reporting.

Because of the nature of our business, we may become involved in legal proceedings that could adversely impact our cash flows or results of operations.

Due to the nature of our businesses, which includes the manufacture and distribution of healthcare products, we may from time to time become involved in legal proceedings. For instance, some of the products we manufacture or distribute may be alleged to cause personal injury or violate the intellectual property rights of another party, subjecting us to product liability or infringement claims. While we generally obtain indemnity rights from the manufacturers of products we distribute, and we carry product liability insurance, it is possible that liability from such claims could exceed those protections. Litigation is inherently unpredictable and the unfavorable resolution of one or more of these legal proceedings could harm our cash flows or results of operations.

Acquisitions are not always as successful as we expect them to be.

Historically, an important element of our growth strategy has been to acquire other businesses that expand or complement our existing businesses. Acquisitions involve risks: we may overpay for a business or fail to realize the synergies and other benefits we expect from the acquisition; we may encounter unforeseen accounting or internal control over financial reporting issues; or the acquired business may have regulatory or compliance issues that we did not anticipate.

We depend on certain suppliers to make their raw materials and products available to us and are subject to fluctuations in costs of raw materials and products.

We depend on various components, compounds, raw materials and energy (including radioisotopes and oil, oil-related and other commodities) supplied by others for our operations. Any of our supplier relationships could be interrupted due to natural disasters or other events or could be terminated. A sustained interruption in the flow of adequate supplies could have an adverse effect on our business. In addition, while we have processes to minimize volatility in component and material pricing, we may not be able to successfully manage price fluctuations.

Our manufacturing businesses use oil, oil-related and other commodities as raw materials in many products. Prices of oil and gas also affect our distribution and transportation costs. Oil and gas prices are volatile and have fluctuated significantly in recent years, so our costs to produce and distribute our products also have fluctuated. Because the healthcare industry is highly competitive and many customers and third-party payors have instituted cost-containment initiatives, we may be unable to pass along cost increases through higher prices. If we cannot fully offset cost increases through other cost reductions, or recover these costs through price increases or fuel surcharges, our results of operations could be adversely affected.

Our global operations are subject to a number of economic, political and regulatory risks.

Our global operations are affected by local economic environments, including inflation, recession, currency volatility and competition. Political changes can disrupt our supply chain—as well as our customers and operating activities—in a particular location. We may not be able to enter into hedges or obtain insurance to protect us against these risks, and any hedges that we enter into or insurance that we are able to obtain may be expensive and may not successfully mitigate these risks.

In addition, our global operations are subject to risks arising from violations of U.S. laws such as the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions, and various export control and trade embargo laws and regulations, including those that may require licenses or other authorizations for transactions within certain countries or with certain counterparties. If we fail to comply with applicable laws and regulations, we could suffer civil and criminal penalties.

Risks associated with the Spin-Off of CareFusion.

This section describes some of the risks that exist as a result of the Spin-Off of CareFusion, which is described in greater detail in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K.

CareFusion may not satisfy all of its contractual obligations . We entered into a number of agreements with CareFusion that govern the rights and obligations of the parties following the Spin-Off. We have certain rights under those agreements, including indemnification against certain liabilities allocated to CareFusion. The failure of CareFusion to perform its obligations under the agreements could have an adverse effect on our financial condition and results of operations.

The transaction may have unexpected tax consequences . In connection with the Spin-Off, we received a private letter ruling from the IRS to the effect that the contribution by us of the assets of the clinical and medical products businesses to CareFusion and the distribution of CareFusion shares to our shareholders would qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code (the “Code”). In addition, we received opinions of tax counsel to the effect that the Spin-Off would qualify as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Code. The IRS private letter ruling and the opinions of counsel rely on certain facts, assumptions, representations and undertakings from us and CareFusion regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not otherwise satisfied, we and our shareholders may not be able to rely on the IRS ruling or the opinions of tax counsel. Similarly, the IRS could determine on audit that the Spin-Off is taxable if it determines that any of the facts, assumptions, representations or undertakings are not correct or have been violated or if the IRS disagrees with the conclusions in the opinions of counsel that are not covered by the private letter ruling or for other reasons, including as a result of certain significant changes in stock ownership of either Cardinal Health or CareFusion. If the Spin-Off is determined to be taxable for U.S. federal income tax purposes, we and our shareholders that are subject to U.S. federal income tax could incur significant tax liabilities.

We may not be able to capture the full benefits from our minority investment in CareFusion. As of June 30, 2010, we owned approximately 30.5 million CareFusion shares. As with any investment in a publicly traded company, this investment is subject to risks and uncertainties relating to CareFusion’s business, as disclosed in CareFusion’s filings with the SEC. In addition, we entered into an agreement in connection with the Spin-Off under which we committed to vote all of our CareFusion shares in proportion to the votes cast by CareFusion’s other shareholders and we do not have any representation on CareFusion’s Board of Directors. As a result, we are not able to exert control or influence over CareFusion to act in a manner that we may believe best for protecting or enhancing the value of our investment.

Under the private letter ruling from the IRS relating to the Spin-Off, we must dispose of the CareFusion shares as soon as practicable after the Spin-Off and consistent with our reasons for retaining the shares, but no later than August 31, 2014. As a result, we may be required to sell some or all of the shares at a time when we might not otherwise choose to do so. Additionally, any disposition of CareFusion shares by us in the public market, or the perception that such dispositions could occur, could adversely affect prevailing market prices for CareFusion shares and adversely affect the value or the terms and conditions of such disposition.

Item 1B:

Unresolved Staff Comments

Not applicable.

Item 2:

Properties

In the United States, the Pharmaceutical segment operates 24 pharmaceutical distribution facilities and one national logistics center; four specialty distribution facilities; and 170 nuclear pharmacy laboratory, manufacturing and distribution facilities. The Medical segment operates 50 medical-surgical distribution, assembly, manufacturing, and research operation facilities. Our U.S. operating facilities are located in 45 states and in Puerto Rico.

Outside of the United States, through our Medical segment, we own or lease 16 manufacturing, distribution and research operating facilities in Canada, the Dominican Republic, Malaysia, Malta, Mexico, and Thailand.

We own 65 operating facilities and lease 200 operating facilities. We own two adjoining four-story buildings at 7000 and 7200 Cardinal Place in Dublin, Ohio, where our principal executive offices are headquartered.

We consider our operating properties to be in satisfactory condition and adequate to meet our present needs. However, we regularly evaluate operating properties and may make further additions and improvements or consolidate locations as we seek opportunities to expand our business.

Item 3:

Legal Proceedings

We become involved from time-to-time in litigation and regulatory matters incidental to our business, including governmental investigations, enforcement actions, personal injury claims, employment matters, commercial disputes, intellectual property matters, disputes regarding environmental clean-up costs, litigation in connection with acquisitions and divestitures, and other matters arising out of the normal conduct of our business. We intend to vigorously defend ourselves in such litigation and regulatory matters. We do not believe that the outcome of any pending litigation will have a material adverse effect on the consolidated financial statements.

Item 4:

Removed and Reserved

Executive Officers of the Registrant

The following is a list of our executive officers as of August 18, 2010:


Name	Age	Position
George S. Barrett	55	Chairman and Chief Executive Officer
Jeffrey W. Henderson	45	Chief Financial Officer
Michael C. Kaufmann	47	Chief Executive Officer, Pharmaceutical segment
Michael A. Lynch	49	Chief Executive Officer, Medical segment
Craig S. Morford	51	Chief Legal and Compliance Officer
Carole S. Watkins	50	Chief Human Resources Officer
Mark R. Blake	39	Executive Vice President, Strategy and Corporate Development
Stephen T. Falk	45	Executive Vice President, General Counsel and Corporate Secretary

The business experience summaries provided below for our executive officers describe positions held during the last five years (unless otherwise indicated).

Mr. Barrett has served as Chairman and Chief Executive Officer since the Spin-Off on August 31, 2009. Prior to that, since January 2008, he served as Vice Chairman of Cardinal Health and Chief Executive Officer, Healthcare Supply Chain Services. Before he joined us, Mr. Barrett held several positions with Teva Pharmaceutical Industries Limited, a global pharmaceutical company. From November 2006 to January 2008, he was President and Chief Executive Officer of Teva North America and Executive Vice President—Global Pharmaceutical Markets and a member of the Office of the Chief Executive Officer for Teva Pharmaceutical Industries. He was President and Chief Executive Officer of Teva North America and Group Vice President—North America of Teva Pharmaceutical Industries from 2005 to 2006. Prior to that, Mr. Barrett served as President of Teva USA from 1998 to 2005.

Mr. Henderson has served as Chief Financial Officer since May 2005 and joined Cardinal Health as an Executive Vice President in April 2005.

Mr. Kaufmann has served as Chief Executive Officer, Pharmaceutical segment, since August 31, 2009. Prior to that, since April 2008, he served as Group President, Pharmaceutical Supply Chain. From April 2007 to April 2008, he was Group President of Healthcare Supply Chain Services Medical segment. From September 2005 – April 2007, he was Chief Financial Officer of Healthcare Supply Chain Services. From May 2005 to September 2005, he was Executive Vice President, Sales, Marketing and Procurement.

Mr. Lynch has served as Chief Executive Officer, Medical segment, since August 31, 2009. Prior to that, since September 2008, he served as Group President, Medical. From July 2004 to September 2008, he was Group President, Medical Products and Technologies.

Mr. Morford has served as Chief Legal and Compliance Officer since May 2009. From May 2008 to May 2009, he served as Chief Compliance Officer. Prior to joining us, from August 2007 to March 2008, he was the Acting Deputy Attorney General of the United States. From October 2006 to July 2007, he was United States Attorney in Nashville, Tennessee. From March 2005 to October 2006, he was First Assistant United States Attorney in the United States Attorney’s office in Cleveland, Ohio.

Ms. Watkins has served as Chief Human Resources Officer and its predecessor position, Executive Vice President—Human Resources, since August 2000.

Mr. Blake has served as Executive Vice President, Strategy and Corporate Development since October 2009. Prior to joining us, since October 2007, he was Vice President, Business Development of Medco Health Solutions, Inc. (“Medco”). From August 2006 to October 2007, he was Senior Director, Business Development, of Medco. From June 2005 to July 2006, he served as Director, Corporate Development, of Avaya, Inc.

Mr. Falk has served as Executive Vice President, General Counsel and Corporate Secretary since May 2009. From April 2007 to May 2009, he served as Executive Vice President and General Counsel of the Healthcare Supply Chain Services segment. From March 2005 to April 2007, he served as Vice President and General Counsel of the Pharmaceutical Technologies and Services segment.

PART II

Item 5:

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

On August 31, 2009, each shareholder received 0.5 shares of CareFusion common stock for each of our Common Shares held on August 25, 2009, the record date for the Spin-Off. On August 31, 2010, the last trading day before the Spin-Off became effective, the closing price of our Common Shares, trading “regular way” (that is with an entitlement to shares of CareFusion common stock distributed in the Spin-Off), was $34.58. On September 1, 2009, the first trading day after the Spin-Off, the opening price of our Common Shares was $25.32 per share and the opening price of CareFusion stock was $19.65 per share. These stock prices were as reported on the New York Stock Exchange Composite Tape.

Our common shares are listed on the New York Stock Exchange under the symbol “CAH.” The following table reflects the range of the reported high and low closing prices of our common shares as reported on the New York Stock Exchange Composite Tape and the per share dividends declared for the fiscal years ended June 30, 2010 and 2009, and from July 1, 2010 through the period ended on August 18, 2010. The stock prices listed in the table below for quarter-end prices prior to August 31, 2009 have not been adjusted for the impact of the Spin-Off.


	High		Low		Dividends
Fiscal 2009
Quarter Ended:
September 30, 2008	$	56.34	$	48.54	$	0.140
December 31, 2008		50.50		28.38		0.140
March 31, 2009		39.53		28.59		0.140
June 30, 2009		36.95		29.81		0.175
Fiscal 2010
Quarter Ended:
September 30, 2009	$	35.63	$	24.97	$	0.175
December 31, 2009		32.95		26.22		0.175
March 31, 2010		36.45		31.31		0.175
June 30, 2010		36.45		32.80		0.195
Fiscal 2011
Through August 18, 2010	$	35.88	$	30.94	$	0.195

As of August 18, 2010 there were approximately 14,493 shareholders of record of the Common Shares.

We anticipate that we will continue to pay quarterly cash dividends in the future. The payment and amount of future dividends remain, however, within the discretion of our Board of Directors and will depend upon our future earnings, financial condition, capital requirements and other factors

Issuer Purchases of Equity Securities


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program (2)	Approximate Dollar Value of Shares That May Yet be Purchased Under the Program (2)
April 1 – 30, 2010	817	$	35.68	0	$	450,000,023
May 1 – 31, 2010	6,179		34.92	0		450,000,023
June 1 – 30, 2010	5,758,600		34.72	5,758,200		250,088,735

Total	5,765,596	$	34.72	5,758,200	$	250,088,735

(1)

Includes 129, 121 and 180 Common Shares purchased in April, May and June 2010, respectively, through a rabbi trust as investments of participants in our Deferred Compensation Plan. Also includes 688, 6,058 and 220 restricted shares surrendered in April, May and June 2010, respectively, by employees upon vesting to meet tax withholding.

(2)

During the three months ended June 30, 2010, we repurchased approximately $200 million of our Common Shares under our existing $500 million share repurchase program announced on August 5, 2009. During July and August 2010, we repurchased an additional $250 million of our Common Shares completing the existing share repurchase program.

Performance Graph

The following line graph compares the cumulative total return of our Common Shares with the cumulative total return of the Standard & Poor’s Composite—500 Stock Index and the Value Line Health Care Sector Index, an independently prepared index that includes more than 100 companies in the health care industry. The graph assumes, in each case, an initial investment of $100 on June 30, 2005, based on the market prices at the end of each fiscal year through and including June 30, 2010, and reinvestment of dividends (and taking into account the value of CareFusion shares distributed in the Spin-Off). The Value Line Health Care Index investment is weighted on the basis of market capitalization at the beginning of each fiscal year. The companies in the Value Line Health Care Index are referred to as the Peer Group in the line graph and accompanying chart.

LOGO


June 30,	2005	2006	2007	2008	2009	2010
Cardinal Health, Inc.	100.00	112.18	123.89	91.28	55.00	86.17
Standard & Poors 500	100.00	108.63	131.00	113.81	83.98	96.10
Peer Group	100.00	104.00	116.53	105.89	91.08	100.30

Item 6:

Selected Financial Data

The consolidated financial data include all business combinations as of the date of acquisition that occurred during these periods. The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and related notes and “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


	At or for the Fiscal Year Ended June 30,
	2010		2009		2008		2007		2006 (1)
	(In millions, except per common share amounts)
Earnings Data:
Revenue	$	98,502.8	$	95,991.5	$	87,408.2	$	84,220.4	$	77,389.4
Earnings from continuing operations		587.0		758.2		847.2		532.1		825.7
Earnings from discontinued operations (2)		55.2		393.4		453.4		1,399.0		174.4

Net earnings	$	642.2	$	1,151.6	$	1,300.6	$	1,931.1	$	1,000.1
Basic earnings per Common Share
Continuing operations	$	1.64	$	2.12	$	2.37	$	1.35	$	1.96
Discontinued operations (2)		0.15		1.10		1.26		3.54		0.42

Net basic earnings per Common Share	$	1.79	$	3.22	$	3.63	$	4.89	$	2.38
Diluted earnings per Common Share
Continuing operations	$	1.62	$	2.10	$	2.33	$	1.31	$	1.93
Discontinued operations (2)		0.15		1.08		1.24		3.46		0.40

Net diluted earnings per Common Share	$	1.77	$	3.18	$	3.57	$	4.77	$	2.33
Cash dividends declared per Common Share		0.720		0.595		0.500		0.390		0.270
Balance Sheet Data:
Total assets	$	19,990.2	$	25,118.8	$	23,448.2	$	23,153.8	$	23,433.3
Long-term obligations, less current portion and other short-term borrowings		1,896.1		3,271.6		3,681.7		3,447.3		2,503.4
Shareholders’ equity (3)		5,276.1		8,724.7		7,747.5		7,376.9		8,490.7

(1)

During the first quarter of fiscal 2006, we adopted new accounting guidance regarding share-based compensation. Prior to this accounting guidance, we accounted for share-based awards under the intrinsic value method, and share-based compensation was included as pro forma disclosure within the notes to the financial statements.

(2)

On August 31, 2009, we separated the clinical and medical products businesses from our other businesses through a pro rata distribution to shareholders of 81% of the then outstanding common stock of CareFusion and met the criteria for classification of these businesses as discontinued operations. During the fourth quarter of fiscal 2009, we committed to plans to sell our United Kingdom-based Martindale injectable manufacturing business within our Pharmaceutical segment, and met the criteria for classification of this business as discontinued operations. During the second quarter of fiscal 2007, we committed to plans to sell our former Pharmaceutical Technologies and Services segment, other than certain generic-focused businesses (the segment, excluding the certain generic-focused businesses that were not sold, is referred to as the “PTS Business”) and met the criteria for classification as discontinued operations. During the first quarter of fiscal 2006, we decided to discontinue our sterile pharmaceutical manufacturing business in Humacao, Puerto Rico, and met the criteria for classification as discontinued operations. For additional information regarding discontinued operations, see Note 5 of “Notes to Consolidated Financial Statements.”

(3)

In the first quarter of fiscal 2008, we adopted new accounting guidance regarding the accounting for uncertainty in income taxes recognized in the financial statements. This accounting guidance provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The amount recognized is measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. The cumulative effect of adopting this accounting guidance was a $139.3 million reduction of retained earnings.

Item 7:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion and analysis presented below refers to and should be read in conjunction with the consolidated financial statements and related notes included in this Form 10-K. Unless otherwise indicated, throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we are referring to our continuing operations.

Executive Overview

We are a $98.5 billion global company serving the healthcare industry with products and services that help hospitals, physician offices and pharmacies reduce costs, improve safety and productivity, and deliver better care to patients. We report our financial results in two segments: Pharmaceutical and Medical.

Our 2010 fiscal year was a significant transition year as we completed the spin-off of CareFusion, transitioned to a new management team, commenced a number of key programs to enhance and refocus our operations and responded to the challenging economic environment and uncertain healthcare industry landscape. During fiscal 2010, our Medical segment profit grew by 11 percent, while continuing to make key strategic investments. Our Pharmaceutical segment profit declined by 3 percent, primarily due to pricing changes on renewed customer contracts, the negative impact of actions we took to improve our strategic positioning, the negative impact from the year-over-year value of generic launches and a severe supply shortage in nuclear pharmacy. These items were largely offset by our execution on major programs and disciplined cost controls.

We plan to continue to execute a balanced deployment of available capital to position ourselves for sustainable competitive advantage and to create shareholder value. This includes reinvesting in the business; during fiscal 2010 we made capital expenditures totaling $260 million, with the majority being in the area of information technology projects. We may seek to complement our internal capabilities or scale with acquisitions, such as the acquisition of Healthcare Solutions Holding, LLC (“P4 Healthcare”) that we recently completed during early fiscal 2011. During fiscal 2010, we paid quarterly dividends of $0.175 per share, or $0.70 per share on an annualized basis. On May 5, 2010, the board of directors approved an 11 percent increase in the quarterly dividend beginning in July 2010. In fiscal 2010 we also repurchased $250 million of shares (of which $20 million cash settled in July 2010).

Trends

As we enter fiscal 2011, we expect low single-digit growth in the primary markets that we serve. Actual revenue growth realized in our two segments may vary from market trends based on customer gains and losses, product and customer sales mix shifts, and growth of the specific customers that we serve.

Our gross margin has been relatively flat over the past three years and decreased as a percentage of revenues primarily as a result of competitive pressures. We began a number of business programs to improve gross margin and increase the sales of higher margin products, which had some success in fiscal 2010. Going forward, our gross margin could be influenced by the rates of growth in our key markets, product and customer sales mix, competitive pricing intensity, sourcing activity, the rate and value of generic pharmaceutical launches, and price changes for our products, including generic and branded pharmaceutical price appreciation or deflation.

radioisotope from third party suppliers because of a continued and prolonged shortage of a critical raw material used to derive that radioisotope from two nuclear reactors, which are experiencing prolonged downtimes. Based on information obtained from parties involved with the two affected nuclear reactors, we anticipate the supply of raw material to normalize in the first half of fiscal 2011.

Within the Medical segment, variability in the cost of raw materials such as oil, oil-related and other commodities can have a significant impact on the cost of products sold. In fiscal 2011, we anticipate a negative year-over-year impact from higher commodity prices.

In March 2010, Congress approved, and the President signed into law, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (the “Health Reform Acts”). The Health Reform Acts seek to expand health insurance coverage to approximately 32 million uninsured Americans. Many of the significant changes in the Healthcare Reform Acts do not take effect until 2014, including a requirement that most Americans carry health insurance. Although we expect expansion of access to health insurance to increase the demand for our products and services, the overall effect of the provisions of the Health Reform Acts on us is uncertain and could be adverse. The Health Reform Acts contain many provisions designed to generate the revenues necessary to fund the coverage expansions and to reduce costs of Medicare and Medicaid. We could be adversely affected by, among other things, changes in the delivery or pricing of or reimbursement for pharmaceuticals, medical devices or healthcare services. In addition, beginning in 2013, each medical device manufacturer will have to pay a tax in an amount equal to 2.3% of the price for which the manufacturer sells its medical devices. We manufacture and sell medical devices that will be subject to this tax.

Acquisitions and Divestitures

In July 2010, subsequent to the end of fiscal 2010, we completed the acquisition of P4 Healthcare for a cash payment of $517 million. The acquisition agreement also includes earn-out payments of up to $150 million over the next three years. With this acquisition, we plan to expand our presence in specialty pharmaceutical services and distribution. P4 Healthcare’s results will be reported within our Pharmaceutical segment.

We consider acquisitions to expand our role as a provider of services and innovative products to the healthcare industry, especially those that complement our existing operations and provide opportunities for us to develop synergies with, and strengthen, the acquired business. There can be no assurance, however, that we will be able to successfully take advantage of any such opportunity if and when it arises or consummate any such transaction, if pursued. As additional transactions are pursued or consummated, we would incur additional acquisition related charges, and may need to enter into funding arrangements for such acquisitions. There can be no assurance that the integration efforts associated with any such transaction will be successful.

During the fourth quarter of fiscal 2010, we sold our United Kingdom-based Martindale injectable manufacturing business (“Martindale”) for $141 million.

Spin-Off of CareFusion Corporation

On August 31, 2009, we separated the clinical and medical products businesses from our other businesses through a pro rata distribution to shareholders of approximately 81% of the then outstanding shares of CareFusion common stock (the “Spin-Off”). We retained certain surgical and exam gloves, surgical drapes and apparel and fluid management businesses that were previously part of our clinical and medical products business. As explained elsewhere in this Form 10-K, the Spin-Off had a significant impact on our results of operations and financial condition.

During fiscal 2010, we sold approximately 10.9 million shares of the 41.4 million shares of CareFusion common stock that we held immediately after the Spin-Off for $271 million, which resulted in a gross pre-tax realized gain of approximately $45 million. As of June 30, 2010, our ownership of approximately 30.5 million

shares of CareFusion common stock had an estimated fair value of $692 million. Under the private letter ruling from the IRS relating to the Spin-Off, we must dispose of the CareFusion shares as soon as practicable after the Spin-Off and consistent with our reasons for retaining the shares, but no later than August 31, 2014. CareFusion has registered the CareFusion stock we own with the SEC, although we may sell the stock under an exemption from registration.

The net assets of CareFusion are presented separately as assets from businesses held for sale and discontinued operations and its operating results are presented within discontinued operations for all reporting periods through the date of the Spin-Off.

Our Continuing Relationship with CareFusion

On July 22, 2009, we entered into a separation agreement with CareFusion to effect the Spin-Off and provide a framework for our relationship with CareFusion after the Spin-Off. In addition, on August 31, 2009, we entered into a transition services agreement, a tax matters agreement, an employee matters agreement, intellectual property agreements and certain other commercial agreements with CareFusion. These agreements, including the separation agreement, provide for the allocation of assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after the Spin-Off and govern certain relationships between CareFusion and us after the Spin-Off.

Pursuant to our transition services agreement with CareFusion, for fiscal 2010 we recognized approximately $99 million in transition service fee income which approximately offsets the costs associated with providing the transition services. Additionally, during fiscal 2010 we purchased $606 million of CareFusion trade receivables pursuant to an accounts receivable factoring arrangement between CareFusion and us.

Under the tax matters agreement in connection with the Spin-Off, CareFusion is obligated to indemnify us for certain tax exposures and transaction taxes prior to the Spin-Off. As of June 30, 2010, we have a $245 million indemnification receivable on our balance sheet related to this item.

Results of Operations

Revenue


	Change				Revenue
	2010		2009		2010			2009			2008
Pharmaceutical	2	%	11	%	$	89,789.9		$	87,862.9		$	79,498.3
Medical	7	%	3	%		8,750.1			8,159.3			7,916.7
Corporate	N.M.		N.M.			(37.2	)		(30.7	)		(6.8	)

Consolidated revenue	3	%	10	%	$	98,502.8		$	95,991.5		$	87,408.2

Fiscal 2010 Compared to Fiscal 2009

Pharmaceutical segment

Pharmaceutical segment revenue was positively impacted by pharmaceutical price appreciation and increased volume from existing customers (a combined impact of $3.4 billion), partially offset by losses of customers in excess of gains ($1.3 billion).

Revenue from non-bulk customers was $45.8 billion, $44.1 billion and $42.2 billion for fiscal 2010, 2009 and 2008, respectively. Revenue from bulk customers was $44.0 billion, $43.7 billion and $37.3 billion for fiscal 2010, 2009 and 2008, respectively. See Item 1: Business for more information about bulk and non-bulk customers.

Medical segment

Medical segment revenue was positively impacted by increased volume from existing hospital, laboratory and ambulatory care customers ($462 million), driven partially by strong demand for flu-related products. Also positively impacting revenue were new products ($74 million) and the favorable impact of foreign exchange ($55 million). In addition, in connection with the Spin-Off, we recognized previously deferred inter-company revenue for sales to CareFusion of $51 million (prior to the Spin-Off, we deferred revenue for products sold to CareFusion businesses until the products were sold to the end customers). Losses of existing customers in excess of gains from new customers reduced revenue by $200 million.

Fiscal 2009 Compared to Fiscal 2008

Pharmaceutical segment

Pharmaceutical segment revenue was positively impacted by pharmaceutical price appreciation and increased volume from existing customers (a combined impact of $7.8 billion). Revenue was negatively impacted by lost customer revenue from the DEA’s suspensions of licenses to distribute controlled substances held by three of our distribution centers and because of enhanced controlled substance anti-diversion efforts that we undertook. We resumed controlled substance distributions from distribution centers that were impacted by the license suspensions during the second quarter of fiscal 2009.

Medical segment

Medical segment revenue was positively impacted by increased volume from existing hospital, laboratory and ambulatory care customers ($386 million). Revenue was negatively impacted by foreign exchange ($88 million).

Cost of Products Sold

Consistent with the increases in revenue, our cost of products sold increased $2.5 billion, or 3%, during fiscal 2010 and increased by $8.6 billion, or 10%, during fiscal 2009.

Gross Margin


	Change				Gross Margin
	2010		2009		2010		2009		2008
Gross margin	1	%	(1	)%	$	3,780.7	$	3,747.5	$	3,777.1

Fiscal 2010 Compared to Fiscal 2009

Pharmaceutical segment

Gross margin decreased $65 million as a result of the factors listed below.

•

Pricing changes on renewed customer contracts (exclusive of the related volume impact) decreased gross margin by $103 million.

•

In fiscal 2009, Medicine Shoppe offered an alternative franchise model to its franchisees to position the franchise system for future growth. This transformation adversely impacted gross margin by $65 million; however, this was partially offset by efficiencies gained within SG&A.

•

Increased branded margin (exclusive of the related volume impact) had a positive impact on gross margin of $38 million despite the adverse timing impact of the transition of a significant vendor relationship to a distribution service agreement. Several factors can influence branded margin, including: our service level performance under distribution service agreements; our inventory level and mix; and the magnitude and timing of pharmaceutical price appreciation.

•

Sales volume growth in pharmaceutical distribution had a positive impact of $22 million.

•

Within nuclear pharmacy, for fiscal 2010, the negative impact of the isotope supply shortage was largely offset by the use of alternative isotopes and the favorable impact of cost of materials savings from conversion to generic products. However, there was a negative impact in the second half of the year due to the severe shortages we experienced during that period.

•

The favorable impact of various generic pharmaceutical product programs in pharmaceutical distribution was partially offset by lower generic margins due to timing and value of new generic launches.

Medical segment

Gross margin increased $95 million as a result of the factors listed below.

•

Increased sales volume resulted in a $67 million increase in gross margin.

•

Decreased cost of oil, oil-related and other commodities favorably impacted gross margin by $36 million.

Fiscal 2009 Compared to Fiscal 2008

Pharmaceutical segment

Gross margin increased by $48 million as a result of the factors listed below.

•

Pricing changes on renewed customer contracts (exclusive of the related volume impact) decreased gross margin by $132 million.

•

Higher sales volume, mainly as a result of growth in pharmaceutical distribution, increased gross margin by $122 million.

•

Timing of new generic pharmaceutical launches resulted in higher generic margins of $69 million.

Medical segment

Gross margin decreased $69 million as a result of the factors listed below.

•

The higher cost of oil, oil-related and other commodities decreased gross margin by $34 million.

•

The negative impact of foreign exchange impacted gross margin by $32 million.

Distribution, Selling, General and Administrative Expenses (“SG&A”)


	Change				SG&A
	2010		2009		2010		2009		2008
SG&A	3	%	—	%	$	2,408.0	$	2,333.5	$	2,340.6

Fiscal 2010 Compared to Fiscal 2009

Increased SG&A during fiscal 2010 was primarily due to an increase in our management incentive compensation. In fiscal 2010, we had incentive compensation accruals that were $46 million above plan due to better than expected consolidated performance compared with incentive compensation accruals that were $36 million below plan in fiscal 2009. In addition, we incurred increased spending on strategic projects ($51 million). SG&A expense growth was significantly mitigated by cost control measures instituted in fiscal 2009 and reduced bad debt expense ($25 million). Included within SG&A were $11 million and $5 million of costs related to the Spin-Off for fiscal 2010 and 2009, respectively.

Fiscal 2009 Compared to Fiscal 2008

Cost control programs enabled us to decrease SG&A expenses in fiscal 2009 by $7 million even though we incurred higher bad debt expense ($38 million). The increased bad debt expense was due to poor economic conditions affecting certain customers and four regional chain customers of our Pharmaceutical segment filing for bankruptcy.

Segment Profit and Operating Earnings


	Change				Segment Profit and Operating Earnings
	2010		2009		2010			2009			2008
Pharmaceutical	(3	)%	1	%	$	1,001.8		$	1,035.7		$	1,022.4
Medical	11	%	(6	)%		427.7			384.9			411.3

Total Segment Profit	1	%	(1	)%		1,429.5			1,420.6			1,433.7
Corporate	N.M.		N.M.			(122.6	)		(133.2	)		(41.3	)

Consolidated Operating Earnings	2	%	(8	)%	$	1,306.9		$	1,287.4		$	1,392.4

Segment Profit

We evaluate the performance of the individual segments based upon, among other things, segment profit, which is segment revenue less segment cost of products sold less segment SG&A expenses. We do not allocate restructuring and employee severance, acquisition related costs, impairments and (gain)/loss on sale of assets, litigation (credits)/charges, net, certain investment and other spending to our segments. These costs are retained at Corporate. Investment spending generally includes the first year spend for certain projects which require incremental strategic investments in the form of additional operating expenses. We encourage our segments to identify investment projects which will promote innovation and provide future returns. As approval decisions for such projects are dependent upon executive management, the expenses for such projects are retained at Corporate. In addition, Spin-Off costs included within SG&A are not allocated to our segments.

Pharmaceutical segment

The principal drivers for the decrease during fiscal 2010 were pricing changes on renewed customer contracts, fewer significant generic pharmaceutical launches than the prior year and the Medicine Shoppe franchise transformation. The decline in segment profit was partially offset by contributions from our generic programs, disciplined cost controls and solid branded margin growth.

The principal drivers for the increase during fiscal 2009 were increased volume and contributions from new generic launches. The increase was partially offset by pricing changes on renewed customer contracts, the impact from anti-diversion activities and bad debt expense.

Segment profits from sales to bulk customers as a percentage of Pharmaceutical segment profit were 11%, 17% and 15% in fiscal 2010, 2009 and 2008. The decrease from fiscal 2009 to fiscal 2010 was due to pricing changes on renewed bulk customer contracts.

Medical segment

The principal drivers for the increase during fiscal 2010 were growth in sales to certain existing customers and decreased cost of raw materials associated with commodity price movements. Segment profit growth was partially dampened from increased spending on strategic projects.

The decrease during fiscal 2009 was primarily due to increased cost of raw materials associated with commodity price movements and the negative impact of foreign exchange.

Consolidated Operating Earnings

In addition to revenue, gross margin and SG&A discussed above, operating earnings were impacted by the following:


	2010			2009		2008
Restructuring and Employee Severance	$	90.7		$	104.7	$	55.3
Acquisition Related Costs		8.4			2.8		2.6
Impairments and (Gain)/Loss on Sale of Assets		29.1			13.9		(33.3	)
Litigation (Credits)/Charges, Net		(62.4	)		5.2		19.5

Fiscal 2010

•

Restructuring and employee severance: Fiscal 2010 restructuring and employee severance charges included $65 million of costs arising from the Spin-Off, including approximately $19 million of costs related to the retirement of our former Chairman and Chief Executive Officer. We expect to incur additional costs associated with existing restructuring activities—primarily arising from the Spin-Off—totaling approximately $15 million.

•

Impairments and (gain)/loss on sale of assets: We recognized an impairment charge of $18 million related to the write-down of SpecialtyScripts, a business within our Pharmaceutical segment. We completed the sale of SpecialtyScripts during the third quarter of fiscal 2010.

•

Litigation (credits)/charges, net: We received income of $41 million resulting from settlement of a class action antitrust claim alleging that a defendant branded pharmaceutical manufacturer took improper actions to delay the entry of a generic version of a branded pharmaceutical. In addition, we received $26 million of income for insurance proceeds released from escrow after litigation against certain directors and officers was resolved.

Fiscal 2009

•

Restructuring and employee severance: During fiscal 2009, restructuring and employee severance primarily related to the Spin-Off ($74 million) and realignment of our segment operating structure ($16 million).

Fiscal 2008

•

Restructuring and employee severance: During fiscal 2008, restructuring and employee severance primarily related to the relocation of our medical products distribution headquarters and certain corporate functions from Waukegan, Illinois to our corporate headquarters in Dublin ($28 million) and realignment of our business operations ($10 million).

•

Impairments and (gain)/loss on sale of assets: During fiscal 2008, we divested an investment within our Pharmaceutical segment and recognized a $23 million gain.

•

Litigation (credits)/charges, net: We recognized litigation charges totaling $74 million due to the resolution of the DEA license suspensions ($34 million) and other matters. These charges were offset by $58 million of income related to the settlement of several derivative actions against certain directors and officers.

Earnings Before Income Taxes and Discontinued Operations

In addition to items discussed above, earnings before income taxes and discontinued operations were impacted by the following:


	Change				Earnings Before Income Taxes and Discontinued Operations
	2010		2009		2010			2009		2008
Other (income)/expense, net	N.M.		N.M.		$	(13.5	)	$	13.2	$	(38.8	)
Interest expense, net	(1	)%	(16	)%		113.5			114.4		136.1
Loss on extinguishment of debt	N.M.		N.M.			39.9			0.0		0.0
Gain on sale of CareFusion common stock	N.M.		N.M.			(44.6	)		0.0		0.0

Fiscal 2010 Compared to Fiscal 2009

•

Other (income)/expense, net: Other (income)/expense, net is favorable compared to fiscal 2009 primarily due to income of $6 million related to the performance of our deferred compensation plan assets versus a $12 million expense in fiscal 2009. The income and expense related to the performance of the deferred compensation plan assets is offset within SG&A. Other (income)/expense, net was also favorably impacted by foreign exchange ($16 million).

•

Loss on extinguishment of debt: On September 24, 2009, we completed a debt tender for up to $1.2 billion of certain outstanding debt securities, ultimately purchasing more than $1.1 billion. The offer was funded by a $1.4 billion cash distribution received from CareFusion immediately prior to the Spin-Off. In connection with the debt tender, we incurred a pre-tax loss for the early retirement of debt of approximately $40 million, which included an early tender premium of $66 million, the write-off of $5 million of unamortized debt issuance costs, and an offsetting $32 million fair value adjustment to the debt related to previously terminated interest rate swaps.

•

Gain on sale of CareFusion common stock: We recognized $45 million of income related to realized gains from the sale of shares of CareFusion common stock.

Fiscal 2009 Compared to Fiscal 2008

•

Other (income)/expense, net: Other (income)/expense, net was unfavorable compared to fiscal 2008 primarily due to the impact of foreign exchange.

•

Interest expense, net: The decrease in interest expense, net was due to the favorable impact of interest rate swaps on fixed rate debt.

Provision for Income Taxes

Generally, fluctuations in the effective tax rate are due to changes within international and U.S. state effective tax rates resulting from our business mix and discrete items. A reconciliation of the provision based on the federal statutory income tax rate to our effective income tax rate from continuing operations is as follows for fiscal 2010, 2009 and 2008 (see Note 9 of “Notes to Consolidated Financial Statements” for a detailed disclosure of the effective tax rate reconciliation):


	Fiscal Year Ended June 30,
	2010		2009		2008
Provision at Federal statutory rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal benefit	4.7		1.8		4.4
Foreign tax rate differential	(2.0	)	(3.8	)	(7.2	)
Unremitted foreign earnings and capital gain from repatriation	13.9		0.0		3.7
Valuation allowances	(2.3	)	(3.1	)	(3.7	)
Other	2.3		4.7		2.4

Effective income tax rate	51.6	%	34.6	%	34.6	%

Fiscal 2010 Compared to Fiscal 2009

The effective tax rate was unfavorably impacted by a charge of $168 million, or 13.9 percentage points, attributable to earnings no longer indefinitely invested offshore. The fiscal 2010 effective tax rate was also unfavorably impacted by 1.8 percentage points due to changes in our business mix which resulted in a higher percentage of our pretax income being generated in the U.S. than in lower tax rate international jurisdictions. A favorable audit settlement with a state taxing authority in fiscal 2009 (see below) also unfavorably impacted the year-over-year comparison of the effective tax rate.

Fiscal 2009 Compared to Fiscal 2008

The effective tax rate was unfavorably impacted by 3.4 percentage points due to changes in our business mix which resulted in a higher percentage of our pretax income being generated in the U.S than in lower tax rate international jurisdictions. The effective tax rate was favorably impacted by 1.4 percentage points due to an audit settlement with a state taxing authority. In addition, the effective tax rate was favorably impacted by 3.1 percentage points due to the release of a valuation allowance on a deferred tax asset established for a capital loss carryforward.

Ongoing Audits

The IRS currently has ongoing audits of fiscal years 2001 through 2007. We have received proposed adjustments from the IRS related to our transfer pricing arrangements between foreign and domestic subsidiaries and the transfer of intellectual property among subsidiaries of an acquired entity prior to its acquisition by us. The IRS proposed additional taxes of $598 million, excluding penalties and interest. If this tax ultimately must be paid, CareFusion is liable under the tax matters agreement for $462 million of the total amount. We disagree with these proposed adjustments and intend to vigorously contest them, but we believe our reserves for these matters are adequate.

Earnings from Discontinued Operations

Earnings from discontinued operations were $55 million for fiscal 2010. CareFusion operating results are included within earnings from discontinued operations for all periods through the date of the Spin-Off. Earnings from discontinued operations, net of tax, decreased by $60 million during fiscal 2009 primarily because CareFusion’s earnings declined—in large part because hospitals deferred capital spending. See Note 5 in the “Notes to Consolidated Financial Statements” for additional information on discontinued operations.

Liquidity and Capital Resources

We currently believe that, based upon available capital resources (cash on hand and ownership of shares of CareFusion common stock), projected operating cash flow, and access to committed credit facilities, we have adequate access to capital resources to fund working capital needs, currently anticipated capital expenditures, business growth and expansion, contractual obligations, current and projected debt service requirements, dividends and share repurchases. In the first quarter of fiscal 2011, we acquired P4 Healthcare using cash on hand. If we decide to engage in one or more additional acquisitions, depending on the size and timing of such transactions, we may need supplemental funding.

Capital Resources

Cash and Equivalents

Our cash and equivalents balance was $2.8 billion at June 30, 2010, compared to $1.2 billion at June 30, 2009. The increase was primarily derived from net cash provided by operating activities of $2.0 billion. Net cash provided by operating activities is primarily driven by net earnings and changes in working capital. Changes in working capital can vary significantly depending on factors such as the timing of inventory purchases, customer payments of accounts receivable, and payments to vendors during the regular course of business.

We use days sales outstanding (“DSO”), days inventory on hand (“DIOH”) and days payable outstanding (“DPO) to evaluate our working capital performance. DSO is calculated as trade receivables, net divided by average daily revenue during the last month of the reporting period. DIOH is calculated as inventories divided by average daily cost of products sold and chargeback billings during the last quarter of the reporting period. DPO is calculated as accounts payable divided by average daily cost of products sold and chargeback billings during the last quarter of the reporting period. Chargeback billings are the difference between a product’s wholesale acquisition cost and the contract price established between the vendors and the end customer.


	Fiscal Year Ended June 30,
	2010	2009	2008
Days sales outstanding	18.6	19.1	19.6
Days inventory on hand	21.5	23.1	24.1
Days payable outstanding	32.1	30.5	31.1

Focused efforts to manage customer accounts and reduce delinquency rates have led to improved DSO. The significant improvement in DIOH was largely due to enhanced efficiency in our supply chain operations to reduce inventory requirements. The change in DPO during fiscal 2010 was largely driven by a change in payable terms with a supplier in our Pharmaceutical segment.

During fiscal 2010, we deployed $260 million on capital expenditures, $253 million on dividends and $230 million on share repurchases (an additional $20 million repurchased during fiscal 2010 settled during fiscal 2011) as part of our balanced capital deployment strategy. During fiscal 2010, we received $271 million in proceeds from sale of CareFusion common stock and $154 million from the divestitures of our Martindale business in the United Kingdom and SpecialtyScripts. In addition, we completed a debt tender resulting in the purchase of more than $1.1 billion debt securities using cash of $1.4 billion distributed to us from CareFusion in connection with the Spin-Off.

During fiscal 2009, we deployed $421 million on capital expenditures, $301 million on repayment of long-term obligations and $200 million on dividends. During fiscal 2008, we deployed $1.2 billion on share repurchases, $189 million on capital expenditures and $173 million on dividends. Also during fiscal 2008, we received $300 million from the issuance of long-term obligations and $228 million from shares issued under our share-based compensation plans.

The cash and equivalents balance at the end of fiscal 2010 included $398 million of cash held by subsidiaries outside of the United States. Although the vast majority of this cash is available for repatriation, bringing the money into the United States could trigger U.S. federal, state and local income tax obligations. As a U.S. parent company, we may temporarily access cash held by our foreign subsidiaries without becoming subject to U.S. federal income tax by taking intercompany loans. The previously disclosed cash held by our foreign subsidiaries does not include intercompany loans of $844 million and $237 million from our foreign entities which are currently planned to be repaid by fiscal 2013 and fiscal 2020, respectively.

The net cash provided by discontinued operations for fiscal 2010 of $1.4 billion primarily reflected permanent financing obtained by CareFusion prior to the Spin-Off offset by $90 million cash funding provided by us to CareFusion pursuant to the Spin-Off separation agreement. Net cash provided by/(used in) discontinued operations for fiscal 2009 and 2008 of $341 million and ($224) million, respectively, primarily related to the earnings and changes in working capital for CareFusion.

Ownership of Shares of CareFusion Common Stock

During fiscal 2010, we sold approximately 10.9 million shares of the 41.4 million shares of CareFusion common stock that we held immediately after the Spin-Off, which resulted in cash proceeds of $271 million. As of June 30, 2010, our remaining 30.5 million shares of CareFusion common stock had an estimated fair value of $692 million. Under the private letter ruling from the IRS relating to the Spin-Off, we must dispose of the CareFusion shares as soon as practicable after the Spin-Off and consistent with our reasons for retaining the shares, but no later than August 31, 2014. CareFusion has registered the CareFusion stock owned by us with the SEC, although we may sell the stock under an exemption from registration.

Credit Facilities and Commercial Paper

Our sources of liquidity include a $1.5 billion revolving credit facility and a $950 million committed receivables sales facility program. We also have a commercial paper program of up to $1.5 billion, backed by the revolving credit facility. We had no outstanding borrowings from the commercial paper program and no outstanding balance under the committed receivables sales facility program at June 30, 2010. Our ability to access the commercial paper market is limited based on our current credit rating from Moody’s Investor Services.

Our revolving credit facility and receivables sales facility program require us to maintain a consolidated interest coverage ratio as of any fiscal quarter end of at least 4-to-1 and a consolidated leverage ratio of no more than 3.25-to-1. As of June 30, 2010, we were in compliance with these financial covenants.

Long-term Obligations

As of June 30, 2010, we had total long-term obligations of $2.1 billion compared to $3.6 billion at June 30, 2009. The decrease in long-term obligations was primarily driven by the debt tender completed in September 2009, resulting in the purchase of more than $1.1 billion debt securities. Additionally, in October 2009, we repaid our $350 million floating rate notes that had reached their maturity.

During fiscal 2009, we repaid $150 million of 6.25% notes that had reached their maturity and we also repaid $149 million for the preferred debt securities.

Capital Expenditures

Capital expenditures during fiscal 2010, 2009 and 2008 of $260 million, $421 million and $189 million, respectively, primarily related to information technology projects and investments to improve the efficiency of our distribution facilities. Fiscal 2009 capital expenditures included $151 million to repurchase assets under an operating lease arrangement.

We expect capital expenditures in fiscal 2011 to be generally in line with the level of spending in fiscal 2010. We anticipate that we will be able to fund these expenditures through cash provided by operating activities. Fiscal 2011 capital expenditures will be largely focused on information technology projects.

Dividends

During fiscal 2010, we paid quarterly dividends of $0.175 per share, or $0.70 per share on an annualized basis. On May 5, 2010, our board of directors approved an 11 percent increase in the quarterly dividend to $0.195 per share, or $0.78 per share on an annualized basis, payable on July 15, 2010 to shareholders of record on July 1, 2010. On August 4, 2010, our board of directors approved our 104th consecutive regular quarterly dividend.

Share Repurchases

During fiscal 2010, we repurchased $250 million of our Common Shares, of which $20 million cash settled in July 2010. During July and August 2010, we repurchased an additional $250 million of our Common Shares which completes share repurchases under our current Board authorization. We funded the repurchases through available cash.

During fiscal 2009, we did not repurchase any of our Common Shares. During fiscal 2008, we repurchased approximately $1.1 billion of our Common Shares. A portion of the after-tax net proceeds of approximately $3.1 billion from the sale of our PTS Business were used to repurchase shares during the first quarter of fiscal 2008.

Interest Rate and Currency Risk Management

We use foreign currency forward contracts, interest rate swaps and commodity swaps to manage our exposure to cash flow variability. We also use foreign currency forward contracts to protect the value of our existing foreign currency assets and liabilities and interest rate swaps to protect the value of our debt. See Item 7A below as well as Notes 1 and 12 of “Notes to Consolidated Financial Statements” for information regarding the use of financial instruments and derivatives as well as foreign currency, interest rate and commodity exposures.

Contractual Obligations

As of June 30, 2010, our contractual obligations, including estimated payments due by period, are as follows:


(in millions)	2011		2012-2013		2014-2015		Thereafter		Total
On Balance Sheet:
Long-term debt (1)	$	232.4	$	517.5	$	530.9	$	843.1	$	2,123.9
Interest on long-term debt		103.0		185.7		160.4		183.4		632.5
Capital lease obligations (2)		1.6		3.3		1.2		—		6.1
Other long-term liabilities (3)		9.2		0.7		1.1		—		11.0
Unsettled share repurchases		19.8		—		—		—		19.8
Off-Balance Sheet:
Operating leases (4)		65.8		93.5		35.9		26.2		221.4
Purchase obligations (5)		172.5		82.2		1.2		0.4		256.3

Total contractual obligations	$	604.3	$	882.9	$	730.7	$	1,053.1	$	3,271.0

(1)	Represents maturities of our long-term debt obligations excluding capital lease obligations described below. See Note 8 in “Notes to Consolidated Financial Statements” for further information.

(2)	Represents maturities of our capital lease obligations included within long-term debt on our consolidated balance sheet and the related estimated future interest payments.

(3)

Represents cash outflows by period for certain of our long-term liabilities in which cash outflows could be reasonably estimated. Certain long-term liabilities, such as unrecognized tax benefits and deferred taxes, have been excluded from the table above because of the inherent uncertainty of the underlying tax positions or because of the inability to reasonably estimate the timing of any cash outflows. See Note 9 of “Notes to Consolidated Financial Statements” for further discussion of income taxes.

(4)	Represents minimum rental payments and the related estimated future interest payments for operating leases having initial or remaining non-cancelable lease terms as described in Note 10 of “Notes to Consolidated Financial Statements.”

(5)

Purchase obligations are defined as an agreement to purchase goods or services that is enforceable and legally binding and specifying all significant terms, including the following: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and approximate timing of the transaction. The purchase obligation amounts disclosed above represent estimates of the minimum for which we are obligated and the time period in which cash outflows will occur. Purchase orders and authorizations to purchase that involve no firm commitment from either party are excluded from the above table. In addition, contracts that can be unilaterally canceled with no termination fee or with proper notice are excluded from our total purchase obligations except for the amount of the termination fee or the minimum amount of goods that must be purchased during the requisite notice period.

Off-Balance Sheet Arrangements

See “Liquidity and Capital Resources—Capital Resources” above and Note 18 in “Notes to Consolidated Financial Statements,” which is incorporated herein by reference, for a discussion of off-balance sheet arrangements.

Recent Financial Accounting Standards

See Note 1 in “Notes to Consolidated Financial Statements” for a discussion of recent financial accounting standards.

Critical Accounting Policies and Sensitive Accounting Estimates

Critical accounting policies are those accounting policies that (i) can have a significant impact on the presentation of our financial condition and results of operations for continuing operations and (ii) require use of complex and subjective estimates based upon past experience and management’s judgment. Other companies applying reasonable judgment to the same facts and circumstances could develop different estimates. Because our estimates are inherently uncertain, actual results may differ. In this section, we describe the policies applied in preparing our consolidated financial statements that management believes are the most dependent on estimates and assumptions. For additional accounting policies, see Note 1 of “Notes to Consolidated Financial Statements.”

Allowance for Doubtful Accounts

Trade receivables—amounts owed to us through our operating activities—are presented net of an allowance for doubtful accounts. We also provide financing to various customers. Such financing arrangements range from 90 days to 10 years at interest rates that generally are subject to fluctuation. Financings may be collateralized, guaranteed by third parties or unsecured. Finance notes and accrued interest receivables are recorded net of an allowance for doubtful accounts and are included in other assets. We must use judgment when deciding whether to extend credit and when calculating the required allowance for doubtful accounts.

The allowance for doubtful accounts includes portfolio and specific reserves. We determine the appropriate allowance by reviewing accounts receivable aging, industry trends, customer financial strength and credit standing, historical write-off trends and payment history. We also regularly evaluate how changes in economic conditions may affect credit risks.

Reserve methodologies are assessed annually based on historical losses and economic, business and market trends. In addition, reserves are reviewed quarterly and updated if appropriate. We may adjust the allowance for doubtful accounts if changes in customers’ financial condition or general economic conditions make defaults more frequent or severe.

The following table gives information regarding the allowance for doubtful accounts over the past three fiscal years.


Fiscal year ended June 30,	Allowance for doubtful accounts (in millions)		Allowance as a percentage of customer receivables		Allowance as a percentage of revenue		Reduction to allowance for customer deductions and write-offs (in millions)		Addition to Allowance (in millions)
2010	$	140.1	2.6	%	0.14	%	$	8.5	$	26.8
2009	$	117.6	2.2	%	0.12	%	$	48.3	$	51.4
2008	$	113.9	2.5	%	0.13	%	$	19.4	$	19.9

A hypothetical 0.1% increase or decrease in the reserve as a percentage of trade receivables, sales-type leases and finance notes receivables at June 30, 2010, would result in an increase or decrease in bad debt expense of approximately $5.3 million.

We believe the reserve maintained and expenses recorded in fiscal 2010 are appropriate. At this time, we are not aware of any analytical findings or customer issues that might lead to a significant future increase in the allowance for doubtful accounts as a percentage of net revenue.

Inventories

A substantial portion of inventories (73% at June 30, 2010, and 74% at June 30, 2009) is stated at the lower of cost, using the LIFO (“last in, first out”) method, or market. These are primarily merchandise inventories at the core pharmaceutical distribution facilities within our Pharmaceutical segment. The LIFO impact on the consolidated statements of earnings in a given year depends on pharmaceutical price appreciation and the level of inventory. Prices for branded pharmaceuticals tend to rise, which results in an increase in cost of products sold, whereas prices for generic pharmaceuticals tend to decline, which results in a decrease in cost of products sold.

The LIFO method presumes that the most recent inventory purchases are the first items sold, so LIFO helps us better match current costs and revenue. Using LIFO, if branded pharmaceutical inventory levels decline, the result generally will be a decrease in future cost of products sold: prices for branded pharmaceuticals tend to rise over time, so our older inventory is held at a lower cost. Conversely, if generic pharmaceutical inventory levels decline, future cost of products sold generally will increase: prices for generic pharmaceuticals tend to decline over time, so our older inventory is held at a higher cost. We believe that the average cost method of inventory valuation reasonably approximates the current cost of replacing inventory within the Pharmaceutical distribution facilities. Accordingly, the LIFO reserve is the difference between (a) inventory at the lower of LIFO cost or market and (b) inventory at replacement cost determined using the average cost method of inventory valuation. In fiscal 2010 and 2009, we did not record any LIFO reserve reductions.

The remaining inventory is stated at the lower of cost, using the FIFO (“first in, first out”) method, or market.

If we had used the average cost method of inventory valuation for all inventory within the Pharmaceutical distribution facilities, the value of inventories would not have changed in fiscal 2010 or fiscal 2009. In fact, primarily because prices for our generic pharmaceutical inventories have continued to decline, inventories at LIFO were $37.7 million and $34.9 million higher than the average cost value as of June 30, 2010, and 2009, respectively. However, we do not record inventories in excess of current market value.

Inventories recorded on the consolidated balance sheets are net of reserves for excess and obsolete inventory, which were $34.4 million at June 30, 2010, and $39.5 million at June 30, 2009. We determine reserves for inventory obsolescence based on historical experiences, sales trends, specific categories of inventory and age of on-hand inventory. If actual conditions are less favorable than our assumptions, additional inventory reserves may be required. However, these reserves are unlikely to have a material adverse impact on the consolidated financial statements.

Goodwill and Other Intangibles

Purchased goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually or when indicators of impairment exist. Intangible assets with finite lives—primarily customer relationships and patents and trademarks—continue to be amortized over their useful lives. Impairment testing involves a comparison of estimated fair value to the respective carrying amount. If estimated fair value exceeds the carrying amount, then no impairment exists. If the carrying amount exceeds the estimated fair value, then a second step is performed to determine the amount of impairment which would be recorded as an expense to our results of operations.

Application of goodwill impairment testing involves judgment, including but not limited to, the identification of reporting units and estimating the fair value of each reporting unit. A reporting unit is defined as an operating segment or one level below an operating segment. In fiscal 2010, we identified three reporting units: Pharmaceutical segment excluding our nuclear and pharmacy services division, Medical segment and nuclear and pharmacy services division. Fair values can be determined using market, income or cost-based approaches. Our determination of estimated fair value of the reporting units is based on a combination of income-based and market-based approaches. Under the market-based approach we determine fair value by comparing our reporting units to similar businesses, or guideline companies whose securities are actively traded in public markets. Under the income-approach, we use a discounted cash flow model in which cash flows anticipated over several periods, plus a terminal value at the end of that time horizon, are discounted to their present value using an appropriate rate of return. To further confirm the fair value, we compare our aggregate fair value of our reporting units to our market capitalization. The use of alternate estimates and assumptions or changes in the industry or peer groups could materially affect the determination of fair value for each reporting unit and potentially result in goodwill impairment.

We performed annual impairment testing in fiscal 2010 and concluded that there were no impairments of goodwill as the fair value of each reporting unit exceeded its carrying value. Due to the Spin-Off and reorganization of the reporting units, goodwill was also tested for impairment in the first quarter of fiscal 2010. Based on this analysis there was no impairment. We also performed annual impairment testing in fiscal 2009 and 2008 using similar fair value approaches; however, our market-based approach historically included a review of the price/earnings ratio for publicly traded companies that were similar in nature, scope and size to our reporting units to the extent available. Based on this analysis there was no impairment. See Note 6 of “Notes to Consolidated Financial Statements” for additional information regarding goodwill and other intangible assets.

If we alter our impairment testing by increasing the discount rate in the discounted cash flow analysis by 1%, there still would not be any impairment indicated for any of our reporting units for fiscal 2010 or 2009.

Vendor Reserves

In the ordinary course of business, our vendors may dispute deductions or billings taken against payments otherwise due to them. These disputed transactions are researched and resolved based upon our policy and findings of the research performed. At any given time, there are outstanding items in various stages of research and resolution. In determining appropriate reserves for areas of exposure with our vendors, we assess historical experience and current outstanding claims. We have established various levels of reserves based on the type of claim and status of review. Though the transaction types are relatively consistent, we periodically refine our

estimate methodology by updating the reserve estimate percentages to reflect actual historical experience. Changes to the estimate percentages affect the cost of products sold in the period in which the change was made.

Vendor reserves were $26.8 million at June 30, 2010, and $53.6 million at June 30, 2009. Approximately 57% of the vendor reserve at June 30, 2010, pertained to the Pharmaceutical segment, compared to 80% at the end of fiscal 2009. The reserve balance will fluctuate due to variations of outstanding claims from period to period, timing of settlements, and specific vendor issues, such as bankruptcies.

The ultimate outcome of certain claims may be different than our original estimate and may require adjustment. We believe, however, that reserves recorded for such disputes are adequate based upon current facts and circumstances.

Provision for Income Taxes

Our income tax expense, deferred tax assets and liabilities, and unrecognized tax benefits reflect management’s assessment of estimated future taxes to be paid on items in the financial statements.

Deferred income taxes arise from temporary differences between financial reporting and tax reporting bases of assets and liabilities, as well as net operating loss and tax credit carryforwards for tax purposes. The following table presents information about our tax position:


Year ended June 30,	Net deferred income tax assets (in millions)		Net deferred income tax liabilities (in billions)		Net loss and credit carryforwards included in net deferred income tax assets (in millions)		Net valuation allowance (in millions) against deferred tax assets (1)
2010	$	578	$	1.2	$	197	$	183
2009	$	622	$	1.8	$	193	$	152

(1)	This valuation allowance primarily relates to federal, state and international loss carryforwards for which the ultimate realization of future benefits is uncertain.

Expiring carryforwards and the required valuation allowances are adjusted annually. After applying the valuation allowances, we do not anticipate any limitations on our use of any of the other net deferred income tax assets described above.

We believe that our estimates for the valuation allowances against deferred tax assets and unrecognized tax benefits are appropriate based on current facts and circumstances. However, other companies applying reasonable judgment to the same facts and circumstances could develop different estimates. The amount we ultimately pay when matters are resolved may differ from the amounts accrued.

Tax benefits from uncertain tax positions are recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The amount recognized is measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement (see Note 1 of “Notes to Consolidated Financial Statements” for a detailed disclosure of the unrecognized tax benefits).

If any of our assumptions or estimates were to change, an increase or decrease in our effective tax rate by 1% on earnings before income taxes and discontinued operations would have caused income tax expense to increase or decrease by $12.1 million for fiscal 2010.

Share-based Compensation

All share-based payments to employees, including grants of options, are recognized in the consolidated statements of earnings based on the grant date fair value of the award. The fair value of stock options is

determined using a lattice valuation model. We believe the lattice model provides for better estimates because it has the ability to take into account employee exercise patterns based on changes in our stock price and other variables and it provides for a range of input assumptions.

During 2010, we calculated separate option valuations for two separate groups of employees. During fiscal 2009 and 2008, we calculated separate option valuations for three separate groups of employees. The groups were determined using similar historical exercise behaviors. The expected life of the options granted was calculated from the option valuation model and represents the length of time in years that the options granted are expected to be outstanding. Expected volatilities are based on implied volatility from traded options on our Common Shares and historical volatility over a period of time commensurate with the contractual term of the option grant (7 years). As required, the forfeiture estimates will be adjusted to reflect actual forfeitures when an award vests. The actual forfeitures in future reporting periods could be higher or lower than our current estimates.

Item 7A:

Quantitative and Qualitative Disclosures about Market Risk

Our businesses are exposed to cash flow and earnings fluctuations as a result of certain market risks. These market risks primarily relate to foreign exchange, interest rate, and commodity related changes. We maintain a comprehensive hedging program to manage volatility related to these market exposures which employs operational, economic, and derivative financial instruments in order to mitigate risk. See Notes 1 and 12 of “Notes to Consolidated Financial Statements” for further discussion regarding our use of derivative instruments.

Foreign Exchange Rate Sensitivity

By nature of our global operations, our businesses are exposed to cash flow and earnings fluctuations resulting from foreign exchange rate variation. These exposures are transactional and translational in nature. Since we manufacture and sell products throughout the world, our foreign currency risk is diversified. Principal drivers of this diversified foreign exchange exposure include the Canadian dollar, European euro, Mexican peso, and Thai baht.

Transactional Exposure

Our businesses’ transactional exposure arises from the purchase and sale of goods and services in currencies other than our functional currency or the functional currency of our subsidiaries. As part of our risk management program, at the end of each fiscal year we perform a sensitivity analysis on our forecasted transactional exposure for the upcoming fiscal year. The fiscal 2010 and fiscal 2009 analyses utilize a currency portfolio model, encompassing both implied volatility and historical correlation to estimate the net potential gain or loss. These analyses included the estimated impact of our hedging program, which mitigates our businesses’ transactional exposure. At June 30, 2010 and 2009, we had hedged approximately 45% and 46%, respectively, of our businesses’ transactional exposures. The following table summarizes the analysis as it relates to our businesses’ transactional exposure (in millions):


	2010			2009
Net estimated transactional exposure	$	318.9		$	336.9
Sensitivity gain/loss	$	35.3		$	45.4
Estimated offsetting impact of hedges		(17.8	)		(22.5	)

Estimated net gain/loss	$	17.5		$	22.9

Translational Exposure

Our businesses also have exposure related to the translation of financial statements of our foreign divisions into U.S. dollars, our functional currency. We perform a similar analysis as described above related to this

translational exposure. We do not typically hedge any of our translational exposure and no hedging impact was included in our analysis at June 30, 2010 and 2009. The following table summarizes our businesses’ translational exposure and the impact of a hypothetical 10% strengthening or weakening in the U.S. dollar (in millions):


	2010		2009
Net estimated translational exposure	$	35.3	$	63.3
Sensitivity gain/loss	$	3.5	$	6.3

Interest Rate Sensitivity

We are exposed to changes in interest rates primarily as a result of our borrowing and investing activities to maintain liquidity and fund business operations. The nature and amount of our long-term and short-term debt can be expected to fluctuate as a result of business requirements, market conditions and other factors. Our policy is to manage exposures to interest rates using a mix of fixed and floating rate debt as deemed appropriate by management. We utilize interest rate swap instruments to mitigate our exposure to interest rate movements.

As part of our risk management program, we annually perform a sensitivity analysis on our forecasted exposure to interest rates for the following fiscal year. This analysis assumes a hypothetical 10% change in interest rates. At June 30, 2010 and 2009, the potential increase or decrease in interest expense under this analysis as a result of this hypothetical change was $0.3 million and $0.1 million, respectively.

Commodity Price Sensitivity

We purchase certain commodities for use in our manufacturing and distribution processes, which include latex, nitrile, diesel fuel and polypropylene, among others. We typically purchase these commodities at market prices, and as a result, are affected by price fluctuations. As part of our risk management program, we perform sensitivity analysis on our forecasted commodity exposure for the following fiscal year. At June 30, 2010 and 2009, we had hedged a portion of these commodity exposures (see Note 12 of “Notes to Consolidated Financial Statements” for further discussion). The table below summarizes our analysis of these forecasted commodity exposures and a hypothetical 10% fluctuation in commodity prices as of June 30, 2010 and 2009 (in millions):


	2010			2009
Estimated commodity exposure	$	240.4		$	117.8
Sensitivity gain/loss	$	24.0		$	11.8
Estimated offsetting impact of hedges		(1.2	)		(1.0	)

Estimated net gain/loss	$	22.8		$	10.8

We also have exposure to certain energy related commodities, including natural gas and electricity through our normal course of business. These exposures result primarily from operating our distribution, manufacturing, and corporate facilities. In certain deregulated markets, we from time to time enter into long-term purchase contracts to supply these items at a specific price.

Item 8:

Financial Statements and Supplementary Data


Report of Independent Registered Public Accounting Firm		39
Consolidated Financial Statements and Schedule:
Consolidated Statements of Earnings for the Fiscal Years Ended June 30, 2010, 2009 and 2008		40
Consolidated Balance Sheets at June 30, 2010 and 2009		41
Consolidated Statements of Shareholders’ Equity for the Fiscal Years Ended June 30, 2010, 2009 and 2008		42
Consolidated Statements of Cash Flows for the Fiscal Years Ended June 30, 2010, 2009 and 2008		43
Notes to Consolidated Financial Statements		44
Schedule II—Valuation and Qualifying Accounts		99

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the

Board of Directors of Cardinal Health, Inc.

We have audited the accompanying consolidated balance sheets of Cardinal Health, Inc. and subsidiaries (the “Company”) as of June 30, 2010 and 2009, and the related consolidated statements of earnings, shareholders’ equity, and cash flows for each of the three years in the period ended June 30, 2010. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2010, in conformity with the U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of June 30, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 26, 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Ernst & Young LLP

Columbus, Ohio

August 26, 2010

CARDINAL HEALTH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS


	Fiscal Year Ended June 30,
	2010			2009		2008
	(In millions, except per common share amounts)
Revenue	$	98,502.8		$	95,991.5	$	87,408.2
Cost of products sold		94,722.1			92,244.0		83,631.1

Gross margin		3,780.7			3,747.5		3,777.1
Operating expenses
Distribution, selling, general and administrative expenses		2,408.0			2,333.5		2,340.6
Restructuring and employee severance		90.7			104.7		55.3
Acquisition related costs		8.4			2.8		2.6
Impairments and (gain)/loss on sale of assets		29.1			13.9		(33.3	)
Litigation (credits)/charges, net		(62.4	)		5.2		19.5

Operating earnings		1,306.9			1,287.4		1,392.4
Other (income)/expense, net		(13.5	)		13.2		(38.8	)
Interest expense, net		113.5			114.4		136.1
Loss on extinguishment of debt		39.9			0.0		0.0
Gain on sale of CareFusion common stock		(44.6	)		0.0		0.0

Earnings before income taxes and discontinued operations		1,211.6			1,159.8		1,295.1
Provision for income taxes		624.6			401.6		447.9

Earnings from continuing operations		587.0			758.2		847.2
Earnings from discontinued operations, net of tax		55.2			393.4		453.4

Net earnings	$	642.2		$	1,151.6	$	1,300.6

Basic earnings per Common Share:
Continuing operations	$	1.64		$	2.12	$	2.37
Discontinued operations		0.15			1.10		1.26

Net basic earnings per Common Share	$	1.79		$	3.22	$	3.63

Diluted earnings per Common Share:
Continuing operations	$	1.62		$	2.10	$	2.33
Discontinued operations		0.15			1.08		1.24

Net diluted earnings per Common Share	$	1.77		$	3.18	$	3.57

Weighted average number of Common Shares outstanding:
Basic		358.8			357.6		358.2
Diluted		361.4			361.5		364.0

The accompanying notes are an integral part of these consolidated statements.

CARDINAL HEALTH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	June 30, 2010			June 30, 2009
	(In millions)
ASSETS
Current assets:
Cash and equivalents	$	2,755.3		$	1,221.6
Trade receivables, net		5,170.6			5,214.9
Inventories		6,355.9			6,832.8
Prepaid expenses and other		637.1			523.0
Assets from businesses held for sale and discontinued operations		0.0			7,189.4

Total current assets		14,918.9			20,981.7

Property and equipment, at cost:
Land, buildings and improvements		1,121.5			1,110.8
Machinery and equipment		1,868.8			1,777.8
Furniture and fixtures		103.4			112.7

Total property and equipment, at cost		3,093.7			3,001.3
Accumulated depreciation and amortization		(1,624.9	)		(1,536.8	)

Property and equipment, net		1,468.8			1,464.5
Other assets:
Investment in CareFusion		691.5			0.0
Goodwill and other intangibles, net		2,253.2			2,266.9
Other		657.8			405.7

Total assets	$	19,990.2		$	25,118.8

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term obligations and other short-term borrowings	$	233.2		$	366.2
Accounts payable		9,494.9			9,041.9
Other accrued liabilities		1,809.5			1,496.2
Liabilities from businesses held for sale and discontinued operations		0.0			1,370.9

Total current liabilities		11,537.6			12,275.2

Long-term obligations, less current portion		1,896.1			3,271.6
Deferred income taxes and other liabilities		1,280.4			847.3
Shareholders’ equity:
Preferred Shares, without par value: Authorized—0.5 million shares, Issued—none		0.0			0.0
Common Shares, without par value: Authorized—755.0 million shares, Issued—363.6 million shares and 363.7 million shares at June 30, 2010 and 2009, respectively		2,889.9			3,031.6
Retained earnings		2,647.2			5,953.9
Common Shares in treasury, at cost: 7.2 million shares and 3.7 million shares at June 30, 2010 and 2009, respectively		(331.0	)		(343.0	)
Accumulated other comprehensive income		70.0			82.2

Total shareholders’ equity		5,276.1			8,724.7

Total liabilities and shareholders’ equity	$	19,990.2		$	25,118.8

The accompanying notes are an integral part of these consolidated statements.

CARDINAL HEALTH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


	Common Shares													Accumulated Other Comprehensive Income/(Loss)			Total Shareholders’ Equity
	Shares Issued		Amount			Retained Earnings			Treasury Shares
	Shares Issued		Amount			Retained Earnings			Shares		Amount
	(In millions)
BALANCE JUNE 30, 2007	493.0		$	3,931.3		$	11,539.9		(124.9	)	$	(8,215.3	)	$	121.0		$	7,376.9
Comprehensive income:
Net earnings							1,300.6											1,300.6
Foreign currency translation adjustments															93.2			93.2
Unrealized loss on derivatives, net of tax															(5.3	)		(5.3	)
Net change in minimum pension liability, net of tax															1.9			1.9

Total comprehensive income																		1,390.4
Impact of adopting income tax guidance (see Note 9)							(139.3	)										(139.3	)
Employee stock plans activity, including tax benefits of $42.1 million	(0.3	)		97.8					6.1			293.2						391.0
Treasury shares acquired									(16.8	)		(1,091.6	)					(1,091.6	)
Retirement of treasury shares	(128.0	)		(1,027.9	)		(7,505.1	)	128.0			8,533.0						0.0
Dividends declared							(179.9	)										(179.9	)

BALANCE JUNE 30, 2008	364.7			3,001.2			5,016.2		(7.6	)		(480.7	)		210.8			7,747.5
Comprehensive income:
Net earnings							1,151.6											1,151.6
Foreign currency translation adjustments															(122.5	)		(122.5	)
Unrealized loss on derivatives, net of tax															(0.8	)		(0.8	)
Net change in pension liability, net of tax															(5.3	)		(5.3	)

Total comprehensive income																		1,023.0
Employee stock plans activity, including tax expense of $2.9 million	(1.0	)		30.4					3.9			137.7						168.1
Dividends declared							(213.9	)										(213.9	)

BALANCE JUNE 30, 2009	363.7			3,031.6			5,953.9		(3.7	)		(343.0	)		82.2			8,724.7
Comprehensive income:
Net earnings							642.2											642.2
Foreign currency translation adjustments															(97.2	)		(97.2	)
Unrealized gain on derivatives, net of tax															23.8			23.8
Unrealized gain on investment in CareFusion, net of tax															61.2			61.2

Total comprehensive income																		630.0
Employee stock plans activity, including tax expense of $16.1 million	(0.1	)		(141.7	)				3.9			261.9						120.2
Treasury shares acquired									(7.4	)		(249.9	)					(249.9	)
Dividends declared							(259.5	)										(259.5	)
Non-cash dividend issued in connection with Spin-off							(3,689.4	)										(3,689.4	)

BALANCE JUNE 30, 2010	363.6		$	2,889.9		$	2,647.2		(7.2	)	$	(331.0	)	$	70.0		$	5,276.1

The accompanying notes are an integral part of these consolidated statements.

CARDINAL HEALTH INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Fiscal Year Ended June 30,
	2010			2009			2008
	(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	642.2		$	1,151.6		$	1,300.6
Earnings from discontinued operations		(55.2	)		(393.4	)		(453.4	)

Earnings from continuing operations		587.0			758.2			847.2
Adjustments to reconcile earnings from continuing operations to net cash from operations:
Depreciation and amortization		254.4			225.8			220.0
Loss on extinguishment of debt		39.9			0.0			0.0
Gain on sale of CareFusion common stock		(44.6	)		0.0			0.0
Impairments and (gain)/loss on sale of assets		29.1			13.9			(32.7	)
Share-based compensation		99.5			109.9			107.9
Provision for deferred income taxes		120.2			149.4			(36.9	)
Provision for bad debts		26.8			51.4			19.9
Change in operating assets and liabilities, net of effects from acquisitions:
Decrease/(increase) in trade receivables		20.6			(713.6	)		(296.1	)
Decrease/(increase) in inventories		477.4			(431.2	)		634.3
Increase/(decrease) in accounts payable		451.0			768.1			(848.2	)
Other accrued liabilities and operating items, net		(74.6	)		19.3			388.5

Net cash provided by operating activities—continuing operations		1,986.7			951.2			1,003.9
Net cash provided by operating activities—discontinued operations		147.4			472.7			537.8

Net cash provided by operating activities		2,134.1			1,423.9			1,541.7

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from divestitures		154.1			123.3			49.1
Acquisition of subsidiaries, net of cash acquired		(32.0	)		(128.6	)		(4.7	)
Net additions to property and equipment		(255.8	)		(408.3	)		(155.8	)
Proceeds from sale of CareFusion common stock		270.7			0.0			0.0
Sale of investment securities available for sale		0.0			0.0			132.0

Net cash provided by/(used in) investing activities—continuing operations		137.0			(413.6	)		20.6
Net cash used in investing activities—discontinued operations		(9.9	)		(129.3	)		(747.0	)

Net cash provided by/(used in) investing activities		127.1			(542.9	)		(726.4	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term obligations		(1,485.5	)		(301.4	)		(3.9	)
Proceeds from long-term obligations, net of issuance costs		0.0			0.0			300.3
Proceeds from issuance of Common Shares		40.0			39.2			227.9
Tax proceeds/(disbursements) from exercises of stock options		(16.1	)		(2.9	)		42.1
Payment of premiums for debt extinguishment		(66.4	)		0.0			0.0
Dividends on Common Shares		(253.1	)		(200.4	)		(173.1	)
Purchase of treasury shares		(230.2	)		0.0			(1,181.6	)

Net cash used in financing activities—continuing operations		(2,011.3	)		(465.5	)		(788.3	)
Net cash provided by/(used in) financing activities—discontinued operations		1,283.8			(2.7	)		(14.9	)

Net cash used in financing activities		(727.5	)		(468.2	)		(803.2	)

NET INCREASE IN CASH AND EQUIVALENTS		1,533.7			412.8			12.1
CASH AND EQUIVALENTS AT BEGINNING OF YEAR		1,221.6			808.8			796.7

CASH AND EQUIVALENTS AT END OF YEAR	$	2,755.3		$	1,221.6		$	808.8

SUPPLEMENTAL INFORMATION:
Cash payments for:
Interest	$	158.4		$	201.8		$	239.8
Income taxes	$	513.7		$	429.3		$	116.0
Non-cash investing and financing transactions for:
Retained investment in CareFusion at date of Spin-Off	$	863.1		$	0.0		$	0.0
Non-cash dividend in connection with Spin-Off	$	3,689.4		$	0.0		$	0.0

The accompanying notes are an integral part of these consolidated statements.

CARDINAL HEALTH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cardinal Health, Inc., an Ohio corporation formed in 1979, is a global healthcare solutions company providing products and services that help hospitals, physician offices, pharmacies and other healthcare providers reduce costs, improve safety and productivity, and deliver better care to patients. References to “we”, “our” and similar pronouns in these consolidated financial statements shall be deemed to be references to Cardinal Health, Inc. and its majority-owned subsidiaries unless the context otherwise requires.

Our fiscal year ends on June 30. References to fiscal 2010, 2009 and 2008 in these consolidated financial statements shall be deemed to be references to the fiscal years ended June 30, 2010, 2009 and 2008, respectively.

Spin-Off of CareFusion Corporation . Effective August 31, 2009, we completed the distribution to our shareholders of 81% of the then outstanding common stock of CareFusion Corporation (“CareFusion”) and retained the remaining 41.4 million shares of CareFusion common stock (the “Spin-Off”). Under the requirements of the Private Letter Ruling obtained from the Internal Revenue Service, we are required to dispose of the retained shares of CareFusion common stock within five years of the Spin-Off. During fiscal 2010, we disposed of 10.9 million shares of CareFusion common stock. Refer to Note 7 for additional information regarding our investment in CareFusion. While we are a party to a separation agreement and various other agreements relating to the separation, including a transition services agreement, a tax matters agreement, an employee matters agreement, intellectual property agreements and other commercial agreements, we have determined that we have no significant continuing involvement in the operations of CareFusion. Accordingly, the net assets of CareFusion are presented separately in these consolidated financial statements as assets from businesses held for sale and discontinued operations and the operating results of CareFusion are presented within discontinued operations for all periods presented through the date of the Spin-Off.

For fiscal 2009, we had three reportable segments—Healthcare Supply Chain Services, Clinical and Medical Products and All Other. Effective July 1, 2009, we changed our reportable segments to: Pharmaceutical, Medical and CareFusion. The Pharmaceutical segment encompasses the businesses previously within the Healthcare Supply Chain Services segment that distributed pharmaceutical, radiopharmaceutical and over-the-counter healthcare products as well as the businesses previously within the All Other segment. The Medical segment encompasses the remaining businesses within the Healthcare Supply Chain Services segment as well as certain surgical and exam gloves, surgical drapes and apparel and fluid management businesses previously within the Clinical and Medical Products segment. The CareFusion segment encompasses the businesses previously within the Clinical and Medical Products segment excluding the above-referenced surgical and exam gloves, surgical drapes and apparel and fluid management businesses and includes all businesses included in the Spin-Off.

In connection with the Spin-Off, we reorganized our reportable segments into two segments: Pharmaceutical and Medical. See Note 16 for information about these segments.

Our Relationship with CareFusion . On July 22, 2009, we entered into a separation agreement with CareFusion to effect the Spin-Off and provide a framework for our relationship with CareFusion after the Spin-Off. In addition, on August 31, 2009, we entered into a transition services agreement, a tax matters agreement, an employee matters agreement, intellectual property agreements and certain other commercial agreements with CareFusion. These agreements, including the separation agreement, between CareFusion and us provide for allocation of assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after the Spin-Off and govern certain relationships between CareFusion and us after the Spin-Off.

Pursuant to the transition services agreement, during fiscal 2010, we recognized $99.2 million in transition service fee income, which approximately offsets the costs associated with providing the transition services. Additionally, during fiscal 2010 we purchased $605.6 million of CareFusion trade receivables pursuant to an accounts receivable factoring arrangement between CareFusion and us.

Under the tax matters agreement, CareFusion is obligated to indemnify us for certain tax exposures and transaction taxes prior to the Spin-Off. As of June 30, 2010, we have a $244.6 million indemnification receivable on our balance sheet related to this item.

Basis of Presentation. Our consolidated financial statements include the accounts of all majority-owned subsidiaries, and all significant intercompany transactions and amounts have been eliminated. Certain prior year balances have been reclassified to conform to the current year presentation. The results of businesses acquired or disposed of are included in the consolidated financial statements from the effective date of the acquisition or up to the date of disposal.

Use of Estimates. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in accordance with GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates, judgments and assumptions are used in the accounting and disclosure related to, among other items, allowance for doubtful accounts, inventory valuation, goodwill and intangible asset impairment, vendor reserves, share-based compensation, and income taxes. Actual amounts could ultimately differ from these estimated amounts.

Cash Equivalents. We consider all liquid investments purchased with a maturity of three months or less to be cash equivalents. The carrying value of cash equivalents approximates fair value.

Receivables. Trade receivables are primarily comprised of amounts owed to us through our distribution businesses and are presented net of an allowance for doubtful accounts of $131.4 million and $111.8 million at June 30, 2010 and 2009, respectively. An account is considered past due on the first day after its due date. In accordance with contract terms, we generally have the ability to charge customer’s service fees or higher prices if an account is considered past due. We continuously monitor past due accounts and establish appropriate reserves to cover potential losses. We will write-off any amounts deemed uncollectible against the established allowance for doubtful accounts.

We provide financing to various customers. Such financing arrangements range from 90 days to 10 years, at interest rates that generally are subject to fluctuation. Interest income on these accounts is recognized as it is earned. The financings may be collateralized, guaranteed by third parties or unsecured. Finance notes and accrued interest receivables were $109.9 million (current portion $20.9 million) and $54.0 million (current portion $26.8 million) at June 30, 2010 and 2009, respectively, and are included in other assets (current portion is included in prepaid expenses and other). Finance notes receivable are reported net of an allowance for doubtful accounts of $8.3 million and $5.2 million at June 30, 2010 and 2009, respectively.

Concentrations of Credit Risk and Major Customers. We maintain cash depository accounts with major banks throughout the world and invest in high quality short-term liquid instruments. Such investments are made only in instruments issued or enhanced by high quality institutions. These investments mature within three months and we have not incurred any related losses.

Our trade receivables, lease receivables, and finance notes and accrued interest receivables are exposed to a concentration of credit risk with customers in the retail and healthcare sectors. Credit risk can be affected by changes in reimbursement and other economic pressures impacting the hospital and acute care sectors of the healthcare industry. Such credit risk is limited, however, due to supporting collateral and the diversity of the customer base, including its wide geographic dispersion. We perform ongoing credit evaluations of our customers’ financial conditions and maintain reserves for credit losses. Such losses historically have been within our expectations.

The following table summarizes all of our customers that individually account for at least 10% of revenue and their corresponding percent of gross trade receivables. The customers in the table below are serviced through our Pharmaceutical segment.


	Percent of Revenue						Percent of Gross Trade Receivables at June 30,
	2010		2009		2008		2010		2009
Walgreen Co.	24	%	24	%	20	%	32	%	36	%
CVS Caremark Corporation	22	%	21	%	23	%	21	%	21	%

Certain of our businesses have entered into agreements with group purchasing organizations (“GPOs”) which act as purchasing agents that negotiate vendor contracts on behalf of their members.

The following table summarizes the revenue that was derived from GPO members through the contractual arrangements established with Novation, LLC and Premier Purchasing Partners, L.P., our two largest GPO relationships in terms of revenue:


	Percent of Revenue
	2010		2009		2008
GPO members	15	%	15	%	15	%

Our trade receivable balances are with individual members of the GPO and therefore no significant concentration of credit risk exists with these types of arrangements.

Inventories. A substantial portion of our inventories (73% at June 30, 2010 and 74% June 30, 2009) are valued at the lower of cost, using the LIFO method, or market. These inventories are included within the core pharmaceutical distribution facilities of our Pharmaceutical segment (“Distribution facilities”) and are primarily merchandise inventories. We believe that the average cost method of inventory valuation provides a reasonable approximation of the current cost of replacing inventory within the Distribution facilities. As such, the LIFO reserve is the difference between (a) inventory at the lower of LIFO cost or market and (b) inventory at replacement cost determined using the average cost method of inventory valuation. In fiscal 2010 and 2009, we did not record any LIFO reserve reductions.

If we had used the average cost method of inventory valuation for all inventory within the Distribution facilities, inventories would not have changed in fiscal 2010 or fiscal 2009. In fact, primarily due to continued generic pharmaceutical deflation, inventories valued at LIFO were $37.7 million and $34.9 million higher than the average cost value as of June 30, 2010 and 2009, respectively. Our policy, however, is not to record inventories in excess of replacement cost.

Our remaining inventory is primarily stated at the lower of cost, using the FIFO method, or market.

Inventories presented on the consolidated balance sheets are net of reserves for excess and obsolete inventory which were $34.4 million and $39.5 million at June 30, 2010 and 2009, respectively. We reserve for inventory obsolescence using estimates based on historical experiences, sales trends, specific categories of inventory and age of on-hand inventory.

Cash Discounts. Manufacturer cash discounts are recorded as a component of inventory cost and recognized as a reduction of cost of products sold when the related inventory is sold.

Property and Equipment. Property and equipment are carried at cost less accumulated depreciation. Property and equipment held for sale are recorded at the lower of cost or fair value less cost to sell. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets, including capital lease

assets which are depreciated over the terms of their respective leases. We use the following range of useful lives for our property and equipment categories: buildings and improvements—1 to 50 years; machinery and equipment—2 to 20 years; furniture and fixtures—3 to 10 years.

The following table shows depreciation expense for fiscal 2010, 2009 and 2008:


	Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Depreciation expense	$	233.4	$	206.9	$	201.6

When certain events or changes in operating conditions occur, an impairment assessment may be performed on the recoverability of the carrying amounts. Repairs and maintenance expenditures are expensed as incurred. Interest on long-term projects is capitalized using a rate that approximates the weighted average interest rate on long-term obligations, which was 5.5% at June 30, 2010. The amount of capitalized interest was immaterial for all fiscal years presented.

Goodwill and Other Intangibles. Purchased goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually or when indicators of impairment exist. Intangible assets with finite lives—primarily customer relationships and patents and trademarks—continue to be amortized over their useful lives. Impairment testing involves a comparison of estimated fair value to the respective carrying amount. If estimated fair value exceeds the carrying amount, then no impairment exists. If the carrying amount exceeds the estimated fair value, then a second step is performed to determine the amount of impairment, which would be recorded as an expense to our results of operations.

Application of goodwill impairment testing involves judgment, including but not limited to, the identification of reporting units and estimating the fair value of each reporting unit. A reporting unit is defined as an operating segment or one level below an operating segment. In fiscal 2010, we identified three reporting units: Pharmaceutical segment excluding our nuclear and pharmacy services division, Medical segment and nuclear and pharmacy services division. Fair values can be determined using market, income or cost-based approaches. Our determination of estimated fair value of the reporting units is based on a combination of income-based and market-based approaches. Under the market-based approach we determine fair value by comparing our reporting units to similar businesses, or guideline companies whose securities are actively traded in public markets. Under the income-approach, we use a discounted cash flow model in which cash flows anticipated over several periods, plus a terminal value at the end of that time horizon, are discounted to their present value using an appropriate rate of return. To further confirm the fair value, we compare the aggregate fair value of our reporting units to our market capitalization. The use of alternate estimates and assumptions or changes in the industry or peer groups could materially affect the determination of fair value for each reporting unit and potentially result in goodwill impairment.

Income Taxes. We account for income taxes using the asset and liability method. The asset and liability method requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between the tax bases and financial reporting bases of our assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates in the respective jurisdictions in which we operate. Deferred taxes are not provided on the unremitted earnings of subsidiaries outside of the U.S. when it is expected that these earnings are permanently reinvested.

Accounting for Vendor Reserves. In the ordinary course of business, our vendors may dispute deductions or billings taken against payments otherwise due to them. These disputed transactions are researched and resolved based upon our policy and findings of the research performed. At any given time, there are outstanding items in various stages of research and resolution. In determining appropriate reserves for areas of exposure with our vendors, we assess historical experience and current outstanding claims. We have established various levels of reserves based on the type of claim and status of review. Though the transaction types are relatively consistent, we periodically refine our estimate methodology by updating the reserve estimate percentages to reflect actual historical experience. The ultimate outcome of certain claims may be different than our original estimate and may require adjustment. All adjustments to vendor reserves are included in cost of products sold. In addition, the reserve balance will fluctuate due to variations of outstanding claims from period to period, timing of settlements, and specific vendor issues, such as bankruptcies. The following table summarizes vendor reserves at June 30, 2010 and 2009:


	June 30,
(in millions)	2010		2009
Vendor reserves	$	26.8	$	53.6

Accounting for Vendor Incentives. Fees for services and other incentives received from vendors, relating to the purchase or distribution of inventory, are generally reported as a reduction of cost of products sold in the consolidated statements of earnings. We consider these fees and other incentives to represent product discounts and, as a result, the amounts are recorded as a reduction of product cost and are recognized through cost of products sold upon sale of the related inventory.

Other Accrued Liabilities. Other accrued liabilities represent various current obligations including certain accrued operating expenses and taxes payable.

Share-Based Compensation. All share-based compensation to employees, including grants of stock options, is recognized in the consolidated statement of earnings based on the grant date fair value of the award. The fair value of stock options is determined using a lattice valuation model. We believe the lattice model provides for better estimates because it has the ability to take into account employee exercise patterns based on changes in our stock price and other variables and it provides for a range of input assumptions.

The compensation expense recognized for all share-based awards is net of estimated forfeitures and is recognized ratably over the service period of the award. We classify share-based compensation expense within distribution, selling, general and administrative (“SG&A”) expenses to correspond with the same line item as the majority of the cash compensation paid to employees. However, certain share-based compensation incurred in connection with the Spin-Off is classified within restructuring and employee severance. See Note 17 for additional information regarding share-based compensation.

Dividends. The following table summarizes the cash dividends per Common Share that we paid for fiscal 2010, 2009 and 2008:


	Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Cash dividends per Common Share	$	0.70	$	0.56	$	0.48

Revenue Recognition. We recognize revenue when persuasive evidence of an arrangement exists, product delivery has occurred or the services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Revenue is recognized net of sales returns and allowances.

Pharmaceutical . This segment recognizes distribution revenue when title transfers to its customers and the business has no further obligation to provide services related to such merchandise.

Revenue within this segment includes revenue from bulk customers. Substantially all deliveries to bulk customers consist of product shipped in the same form that we received from the manufacturer. Bulk customers have the ability to process large quantities of products in central locations and distribute these products to their individual retail stores or facilities. Revenue from bulk customers is recognized when title transfers to the customer and we have no further obligation to provide services related to such merchandise.

Revenue for deliveries that are directly shipped to customer warehouses from the manufacturer whereby we act as an intermediary in the ordering and delivery of products is recorded gross in accordance with accounting standards addressing reporting revenue on a gross basis as a principal versus on a net basis as an agent. This revenue is recorded on a gross basis since we incur credit risk from the customer, bear the risk of loss for incomplete shipments and do not receive a separate fee or commission for the transaction and, as such, are the primary obligor.

Radiopharmaceutical revenue is recognized upon delivery of the product to the customer. Service-related revenue, including fees received for analytical services or sales and marketing services, is recognized upon the completion of such services.

Pharmacy management, third-party logistics and other service revenue is recognized as the services are rendered according to the contracts established. A fee is charged under such contracts through a capitation fee, a dispensing fee, a monthly management fee or an actual costs-incurred arrangement. Under certain contracts, fees for services are guaranteed by us not to exceed stipulated amounts or have other risk-sharing provisions. Revenue is adjusted to reflect the estimated effects of such contractual guarantees and risk-sharing provisions.

Medicine Shoppe International, Inc. and Medicap Pharmacies Incorporated earn franchise and origination fees. Franchise fees represent monthly fees that are either fixed or based upon franchisees’ sales and are recognized as revenue when they are earned.

Medical . This segment recognizes distribution revenue when title transfers to its customers and the business has no further obligation to provide services related to such merchandise. Revenue from the sale of medical products and supplies is recognized when title and risk of loss transfers to its customers, which is typically upon delivery.

Multiple Segments or Business Units . Arrangements involving multiple segments or business units containing no software or software that is incidental to the functionality of the product or service are accounted for as revenue arrangements with multiple deliverables. If the deliverable meets the criterion of a separate unit of accounting, revenue is allocated to each element based upon its relative fair value and recognized in accordance with the applicable revenue recognition criteria for each element.

Sales Returns and Allowances. Revenue is recorded net of sales returns and allowances. We recognize sales returns as a reduction of revenue and cost of products sold for the sales price and cost, respectively, when products are returned. Our customer return policies generally require that the product be physically returned, subject to restocking fees, and only allow customers to return products that can be added back to inventory and resold at full value, or that can be returned to vendors for credit (“merchantable product”). Product returns are generally consistent throughout the year, and typically are not specific to any particular product or customer. Amounts recorded in revenue and cost of products sold under this accounting policy closely approximate what would have been recorded had we accrued for sales returns and allowances at the time of the sale transaction.

The following table summarizes sales returns and allowances for the fiscal years ended June 30, 2010, 2009 and 2008:


	Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Sales returns and allowances	$	1,516.2	$	1,391.4	$	1,191.5

Since we generally do not accept non-merchantable product returns from our customers, many of our customers return non-merchantable pharmaceutical products to our vendors via third-parties. Generally, our customers do not have a direct relationship with our vendors and, as such, our vendors pass the value of the returns to us (usually in the form of an accounts payable deduction). We in turn pass the value received, less an administrative fee, to our customer. In certain instances, we pass the estimated value of the return to our customer prior to processing the deduction with our vendors. Although in general we believe we have satisfactory contractual protections, we could be subject to allegations of liability from customers or vendors if our administration of this overall process was deficient in some significant respect. In certain situations, we have maintained reserves for such allegations based on their nature and our historical experience with their resolution. Those reserves were not significant in fiscal 2010, 2009 or 2008.

Distribution Service Agreement and Other Vendor Fees. Our Pharmaceutical segment recognizes fees received from its distribution service agreements and other fees received from vendors related to the purchase or distribution of the vendor’s inventory when those fees have been earned and we are entitled to payment. We recognize the fees as a reduction in the carrying value of the inventory that generated the fees and, as such, the fees are recognized as a reduction of cost of products sold in our statements of earnings when that inventory is sold.

Shipping and Handling. Shipping and handling costs are included in SG&A expenses in our consolidated statements of earnings. Shipping and handling costs include all delivery expenses as well as all costs to prepare the product for shipment to the end customer.

The following table summarizes shipping and handling costs for fiscal 2010, 2009 and 2008:


	Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Shipping and handling costs	$	293.5	$	289.7	$	270.0

Shipping and handling revenue received was immaterial for all periods presented.

Translation of Foreign Currencies. Financial statements of our subsidiaries outside the U.S. generally are measured using the local currency as the functional currency. Adjustments to translate the assets and liabilities of these foreign subsidiaries into U.S. dollars are accumulated in shareholders’ equity through other comprehensive income utilizing period-end exchange rates. Revenues and expenses of these foreign subsidiaries are translated using average exchange rates during the year.

The following table summarizes the foreign currency translation gains/(losses) recognized in accumulated other comprehensive income at June 30, 2010 and 2009:


	June 30,
(in millions)	2010			2009
Foreign currency translation (gains)/losses	$	(1.0	)	$	96.2

Foreign currency transaction gains and losses, calculated by utilizing weighted average exchange rates for the period, are included in the consolidated statements of earnings in other (income)/expense, net, and were immaterial for fiscal 2010, 2009 and 2008, respectively.

Interest Rate and Currency Risk Management. All derivative instruments are recognized at fair value on the balance sheet and all changes in fair value are recognized in net earnings or shareholders’ equity through other comprehensive income, net of tax.

We use forward currency exchange contracts and interest rate swaps to manage our exposures to the variability of cash flows primarily related to the foreign exchange rate changes of future foreign currency transaction costs and to the interest rate changes on borrowing costs. These contracts are designated as cash flow hedges.

We also use interest rate swaps to hedge changes in the value of fixed rate debt due to variations in interest rates. Both the derivative instruments and underlying debt are adjusted to fair value through interest expense at the end of each period. We use foreign currency forward contracts to protect the value of existing foreign currency assets and liabilities. The remeasurement adjustments for any foreign currency denominated assets or liabilities are included in other (income)/expense, net. The remeasurement adjustment is offset by the foreign currency forward contract settlements which are also classified in other (income)/expense, net. These interest rate swaps are designated as fair value hedges. The foreign currency forward contracts are designated as economic hedges.

Certain derivative contracts are adjusted to current market values each period and qualify for hedge accounting. Periodic gains and losses of contracts designated as cash flow hedges are deferred in accumulated other comprehensive income until the underlying transactions are recognized. Upon recognition, such gains and losses are recorded in net earnings as an adjustment to the carrying amounts of underlying transactions in the period in which these transactions are recognized. For those contracts designated as fair value hedges, resulting gains or losses are recognized in net earnings offsetting the exposures of underlying transactions.

Our policy requires that contracts used as hedges must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract. Hedging effectiveness is assessed periodically. Any contract not designated as a hedge, or so designated but ineffective, is adjusted to fair value and recognized in net earnings immediately. If a fair value or cash flow hedge ceases to qualify for hedge accounting or is terminated, the contract would continue to be carried on the balance sheet at fair value until settled and future adjustments to the contract’s fair value would be recognized in earnings immediately. If a forecasted transaction was no longer probable to occur, amounts previously deferred in accumulated other comprehensive income would be recognized immediately in earnings. Additional disclosure related to our hedging contracts is provided in Note 12.

Earnings per Common Share. Basic earnings per Common Share (“Basic EPS”) is computed by dividing net earnings (the numerator) by the weighted average number of Common Shares outstanding during each period (the denominator). Diluted earnings per Common Share (“Diluted EPS”) is similar to the computation for Basic EPS, except that the denominator is increased by the dilutive effect of vested and unvested stock options, restricted shares and restricted share units computed using the treasury stock method.

Recent Financial Accounting Standards. In June 2009, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance on the accounting for transfers of financial assets. This guidance improves the relevance, representational faithfulness and comparability of information provided about a transfer of financial assets, the effects of a transfer of financial assets on an entity’s financial statements, and a transferor’s continuing involvement, if any, in financial assets transferred. This guidance is effective for fiscal years beginning after November 15, 2009. As a result of this new guidance, we have determined that our committed receivables sales facility will not qualify as an off-balance sheet arrangement beginning in fiscal 2011. At June 30, 2010, we had no amounts outstanding under this facility.

In June 2009, the FASB issued new accounting guidance regarding the consolidation of variable interest entities. This guidance improves the financial reporting by enterprises involved with variable interest entities. This guidance is effective for fiscal years beginning after November 15, 2009. We do not expect the adoption of this new accounting guidance to have a material impact on our financial position or results of operations.

In January 2010, the FASB issued new disclosure guidance regarding fair value measurements. This guidance improves the transparency of disclosures about the use of fair value measurements in financial statements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, with the exception of certain disclosure requirements regarding gross changes in Level 3 measurements, which are not effective until fiscal years beginning after December 15, 2010. We adopted this new disclosure guidance in the third quarter of fiscal 2010 and have included the required additional disclosures in this Form 10-K.

2.	ACQUISITIONS

Fiscal 2010 . During fiscal 2010, we completed an acquisition that individually was not significant. The aggregate purchase price of this acquisition, which was paid in cash, was $32.0 million, including the assumption of $1.9 million of liabilities. The consolidated financial statements include the results of operations from this business combination from the date of the acquisition. Had the transaction occurred at the beginning of fiscal 2009, consolidated results of operations would not have differed materially from reported results.

Fiscal 2009 . During fiscal 2009, we completed an acquisition that individually was not significant. The aggregate purchase price of this acquisition, which was paid in cash, was $128.6 million including potential maximum contingent payments of $14.0 million. Assumed liabilities of this acquired business were $102.1 million. The consolidated financial statements include the results of operations from this business combination from the date of acquisition. Had the transaction occurred at the beginning of fiscal 2008, consolidated results of operations would not have differed materially from reported results.

Fiscal 2008 . On May 12, 2008, we completed the acquisition of assets of privately held Enturia Inc. (“Enturia”), a Leawood, Kansas-based manufacturer of products and services directed at the infection prevention markets. The purchase price of the acquisition, which was paid in cash, was $490.0 million, including the assumption of $14.2 million of liabilities, which included $5.1 million of debt.

The valuation of the acquired assets and liabilities resulted in goodwill of $327.8 million and identifiable intangible assets of $129.4 million. We identified and valued intangible assets related to trade names and trademarks, developed technology and customer relationships. The detail by category is as follows.


Category	Amount (in millions)		Average Life (Years)
Trade names and trademarks	$	19.1	10
Developed technology		25.3	10
Customer relationships		85.0	10

Total intangible assets acquired	$	129.4

During fiscal 2008, we recorded a charge of $17.7 million related to the write-off of estimated in-process research and development costs (“IPR&D”) associated with the Enturia acquisition. The portion of the purchase price allocated to IPR&D in fiscal 2008 represented our preliminary estimate of the fair value of the research and development projects in-process at the time of the acquisition. These projects had not yet reached technological feasibility, were deemed to have no alternative use and, accordingly, were immediately expensed as acquisition related costs at the acquisition date.

In connection with the Spin-Off, Enturia was transferred to CareFusion and has been reclassified to discontinued operations for all periods through the date of the Spin-Off.

In addition, during fiscal 2008, we completed other acquisitions that individually were not significant. The aggregate purchase price of these acquisitions, which was paid in cash, was $35.3 million, including the assumption of $5.6 million of liabilities. In connection with the Spin-Off, $30.6 million of the total cash paid has been reclassified to net cash used in investing activities—discontinued operations. The consolidated financial

statements include the results of operations from each of these business combinations from the date of acquisition. Had the transactions occurred at the beginning of fiscal 2007, consolidated results of operations would not have differed materially from reported results. In connection with the Spin-Off, some of these businesses have also been reclassified to discontinued operations for all periods through the date of the Spin-Off.

Acquisition Related Costs

We classify costs incurred in connection with acquisitions as acquisition related costs. These costs consist primarily of transaction costs, integration costs and changes in the fair value of contingent payments (earn-outs). Acquisition transaction costs are incurred during the initial evaluation of a potential targeted acquisition and primarily relate to costs to analyze, negotiate and consummate the transaction as well as financial and legal due diligence activities. Integration activities are costs incurred to combine the operations of an acquired enterprise into our operations.

3.	RESTRUCTURING AND EMPLOYEE SEVERANCE

Restructuring Policy

We consider restructuring activities as programs whereby we fundamentally change our operations such as closing facilities, moving manufacturing of a product to another location or outsourcing the production of a product. Restructuring activities may also involve substantial re-alignment of the management structure of a business unit in response to changing market conditions. A liability for a cost associated with an exit or disposal activity is recognized and measured initially at its fair value in the period in which it is incurred except for a liability for a one-time termination benefit, which is recognized over its future service period.

Restructuring and Employee Severance

The following table summarizes activity related to our restructuring and employee severance costs during fiscal 2010, 2009 and 2008:


	Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Employee related costs (1)	$	32.9	$	33.8	$	30.0
Facility exit and other costs (2)		57.8		70.9		25.3

Total restructuring and employee severance	$	90.7	$	104.7	$	55.3

(1)	Employee-Related Costs . These costs primarily consist of one-time termination benefits provided to employees who have been involuntarily terminated and duplicate payroll costs during transition periods.

(2)	Facility Exit and Other Costs . Facility exit and other costs consist of accelerated depreciation, equipment relocation costs, project consulting fees and costs associated with restructuring our delivery of information technology infrastructure services.

Restructuring and employee severance for fiscal 2010, 2009 and 2008 included costs related to the following significant projects:


	Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Spin-Off (1)	$	64.5	$	73.8	$	0.0
Segment Realignment (2)		2.0		15.7		0.2
Medical Headquarters Relocation (3)		0.1		1.0		28.3

(1)	During fiscal 2009 and fiscal 2010, we incurred restructuring expenses related to the Spin-Off consisting of employee-related costs, share-based compensation, costs to evaluate and execute the transaction, costs to

separate certain functions and information technology systems and other one-time transaction related costs. See Note 17 for further information regarding share-based compensation incurred in connection with the Spin-Off. Also included within these costs is $18.6 million of costs related to the retirement of our former Chairman and Chief Executive Officer upon completion of the Spin-Off.

(2)

During fiscal 2009, we consolidated our businesses into two primary operating and reportable segments to reduce costs and align resources with the needs of each segment (“Segment Realignment”). In connection with the Spin-Off, these reportable segments have since been reorganized. Refer to Notes 1 and 16 for additional information regarding our current reportable segments.

(3)	In April 2007, we announced a plan to move our medical products distribution headquarters and certain corporate functions from Waukegan, Illinois to our corporate headquarters in Dublin, Ohio.

In addition to the significant restructuring programs discussed above, from time to time we incur costs to implement smaller restructuring efforts for specific operations within our segments. These restructuring plans focus on various aspects of operations, including closing and consolidating certain manufacturing and distribution operations, rationalizing headcount and aligning operations in the most strategic and cost-efficient structure.

We estimate that we will incur additional costs in future periods associated with currently anticipated restructuring activities totaling $14.5 million. These additional costs are primarily associated with the Spin-Off.

Restructuring and Employee Severance Accrual Rollforward

The following table summarizes activity related to liabilities associated with our restructuring and employee severance activities during fiscal 2010, 2009 and 2008:


(in millions)	Employee Related Costs			Facility Exit and Other Costs			Total
Balance at June 30, 2007	$	14.1		$	1.8		$	15.9
Additions		30.0			25.3			55.3
Payments and other adjustments		(21.6	)		(26.7	)		(48.3	)

Balance at June 30, 2008		22.5			0.4			22.9
Additions		33.8			70.9			104.7
Payments and other adjustments		(43.1	)		(59.0	)		(102.1	)

Balance at June 30, 2009		13.2			12.3			25.5
Additions		32.9			57.8			90.7
Payments and other adjustments		(36.9	)		(62.7	)		(99.6	)

Balance at June 30, 2010	$	9.2		$	7.4		$	16.6

4.	IMPAIRMENTS AND (GAIN)/LOSS ON SALE OF ASSETS

During fiscal 2010, we recognized an $18.1 million impairment charge related to the write-down of SpecialtyScripts, LLC (“SpecialtyScripts”), a business within the Pharmaceutical segment, to net expected fair value less costs to sell. See Note 5 for further information regarding the sale of SpecialtyScripts.

During fiscal 2008, we recognized a $23.3 million gain from a divestiture within the Pharmaceutical segment.

5.	DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

CareFusion

Effective August 31, 2009, we completed the distribution to our shareholders of 81% of the then outstanding common stock of CareFusion. Our retained investment in CareFusion common stock does not provide us the

ability to influence the operating or financial policies of CareFusion and accordingly does not constitute significant continuing involvement. We are required under the separation agreement to vote all of our CareFusion shares in proportion to the votes cast by CareFusion’s other shareholders. Furthermore, while we are a party to a separation agreement and various other agreements relating to the separation, including a transition services agreement, a tax matters agreement, an employee matters agreement, intellectual property agreements and certain other commercial agreements, we have determined that the continuing cash flows generated by these agreements, which are expected to be eliminated within five years of the Spin-Off, and our investment in CareFusion common stock, do not constitute significant continuing involvement in the operations of CareFusion. Accordingly, the net assets of CareFusion are presented separately as discontinued operations and the operating results are presented within discontinued operations for all periods presented through the date of the Spin-Off.

The results of CareFusion included in discontinued operations for fiscal 2010, 2009 and 2008 are summarized as follows:


	Fiscal Year Ended June 30,
(in millions)	2010 (1)			2009			2008
Revenue	$	592.1		$	3,520.9		$	3,567.3
Earnings before income taxes		43.7			507.2			627.0
Income tax expense		(28.7	)		(122.6	)		(178.2	)
Earnings from discontinued operations		15.0			384.6			448.8

(1)	Reflects the results of CareFusion through August 31, 2009, the effective date of the Spin-Off.

Interest expense was allocated to historical periods considering the debt issued by CareFusion in connection with the Spin-Off and our overall debt balance. In addition, a portion of the corporate costs previously allocated to CareFusion have been reclassified to the remaining two segments.

The following table summarizes the interest expense allocated to discontinued operations for CareFusion during fiscal 2010, 2009 and 2008:


	Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Interest expense allocated to CareFusion	$	12.8	$	75.2	$	84.1

There were no assets and liabilities from businesses held for sale for CareFusion at June 30, 2010. At June 30, 2009, the major components of assets and liabilities from businesses held for sale for CareFusion were as follows:


(in millions)	June 30, 2009
Current assets	$	1,832.0
Property and equipment		408.5
Other assets		4,774.2

Total assets	$	7,014.7

Current liabilities	$	469.2
Long-term debt and other		875.4

Total liabilities	$	1,344.6

Cash flows from discontinued operations are presented separately on the consolidated statements of cash flows.

Other

During the fourth quarter of fiscal 2007, we sold our businesses within the former Pharmaceutical Technologies and Services segment, other than certain generic-focused businesses (the “PTS Business”). See Note 7 of the “Notes to Consolidated Financial Statements” from the Annual Report on Form 10-K for the fiscal year ended June 30, 2009 (the “2009 Form 10-K”) for information regarding the sale of the PTS Business. We incurred minor amounts of activity related to the PTS Business during fiscal 2009 as a result of changes in certain estimates made at the time of the sale, activity under a transition services agreement and other adjustments.

During the fourth quarter of fiscal 2009, we committed to plans to sell the United Kingdom-based Martindale injectable manufacturing business (“Martindale”) within our Pharmaceutical segment, and Martindale met the criteria for classification as discontinued operations in the financial statements. During the fourth quarter of fiscal 2010, we completed the sale of Martindale resulting in a pre-tax gain of $36.3 million. Accordingly, the net assets of Martindale are presented separately as discontinued operations and the operating results of Martindale are presented within discontinued operations for all periods presented through the date of sale.

During the fourth quarter of fiscal 2009, we also committed to plans to sell SpecialtyScripts within our Pharmaceutical segment, and SpecialtyScripts met the criteria for classification as held for sale in our financial statements. During the third quarter of fiscal 2010, we completed the sale of SpecialtyScripts. Accordingly, the net assets of this business are presented separately as assets held for sale on our consolidated balance sheet through the date of sale. The results of SpecialtyScripts are reported within earnings from continuing operations on our consolidated statements of earnings through the date of sale because it did not satisfy the criteria for classification as discontinued operations. Additionally, the net assets held for sale of SpecialtyScripts were recorded at the net expected fair value less costs to sell, as this amount was lower than its net carrying value.

The results of the PTS Business and Martindale included in discontinued operations for fiscal 2010, 2009 and 2008 are summarized as follows:


	Fiscal Year Ended June 30,
(in millions)	2010			2009			2008
Revenue	$	99.1		$	100.5		$	115.9
Earnings before income taxes		47.0			17.4			44.3
Income tax expense		(6.8	)		(8.6	)		(39.7	)
Earnings from discontinued operations		40.2			8.8			4.6

There were no assets and liabilities from businesses held for sale for PTS Business, Martindale or SpecialtyScripts at June 30, 2010. At June 30, 2009, the major components of assets and liabilities from businesses held for sale related to the PTS Business, Martindale and SpecialtyScripts were as follows:


(in millions)	June 30, 2009
Current assets	$	74.2
Property and equipment		19.3
Other assets		81.2

Total assets	$	174.7

Current liabilities	$	16.5
Long-term debt and other		9.8

Total liabilities	$	26.3

6.	GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The following table summarizes the changes in the carrying amount of goodwill, in total and by segment, for the two years ended June 30, 2010:


(in millions)	Pharmaceutical			Medical			Total
Balance at June 30, 2008	$	1,258.1		$	971.2		$	2,229.3
Goodwill acquired, net of purchase price adjustments, foreign currency translation adjustments and other		(15.8	)		(7.5	)		(23.3	)
Goodwill related to the divestiture or closure of businesses and assets held for sale		(9.5	)		0.0			(9.5	)

Balance at June 30, 2009		1,232.8			963.7			2,196.5
Goodwill acquired, net of purchase price adjustments, foreign currency translation adjustments and other		17.4			(6.7	)		10.7
Goodwill related to the divestiture or closure of businesses and assets held for sale		(1.8	)		0.0			(1.8	)

Balance at June 30, 2010	$	1,248.4		$	957.0		$	2,205.4

The allocations of the purchase price related to certain small acquisitions are not yet finalized and are subject to adjustment as we complete the valuation analyses for these acquisitions.

Intangible Assets

Intangible assets with definite lives are amortized over their useful lives which range from three to twenty years. The detail of other intangible assets by class for the two years ended June 30, 2010 is as follows:


(in millions)	Gross Intangible		Accumulated Amortization		Net Intangible
June 30, 2009
Unamortized intangibles:
Trademarks and patents	$	11.4	$	0.0	$	11.4

Total unamortized intangibles		11.4		0.0		11.4
Amortized intangibles:
Trademarks and patents		30.2		12.9		17.3
Non-compete agreements		3.9		2.5		1.4
Customer relationships		46.6		35.1		11.5
Other		66.2		37.4		28.8

Total amortized intangibles		146.9		87.9		59.0

Total intangibles	$	158.3	$	87.9	$	70.4

June 30, 2010
Unamortized intangibles:
Trademarks and patents	$	10.2	$	0.0	$	10.2

Total unamortized intangibles		10.2		0.0		10.2
Amortized intangibles:
Trademarks and patents		20.3		14.1		6.2
Non-compete agreements		3.8		2.8		1.0
Customer relationships		48.4		41.1		7.3
Other		47.2		24.1		23.1

Total amortized intangibles		119.7		82.1		37.6

Total intangibles	$	129.9	$	82.1	$	47.8

There were no significant acquisitions of other intangible assets during the periods presented.

The following table summarizes amortization expense during fiscal 2010, 2009 and 2008:


	Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Amortization expense	$	11.2	$	15.0	$	12.0

Amortization expense for each of the next five fiscal years is estimated to be:


(in millions)	2011		2012		2013		2014		2015
Amortization expense	$	10.8	$	5.7	$	3.3	$	2.9	$	2.6

7.	INVESTMENT IN CAREFUSION

The following table provides a summary of our investment in CareFusion, which is classified as available-for-sale, as of June 30, 2010:


	Available-for-Sale Securities
(in millions)	Cost (2)		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Equity securities (1)	$	630.3	$	61.2	$	0.0	$	691.5

Total	$	630.3	$	61.2	$	0.0	$	691.5

(1)

Equity securities consist of our remaining ownership of 30.5 million shares of the 41.4 million shares of CareFusion common stock that we held immediately after the Spin-Off. These securities are stated at fair value with unrealized gains and losses reported in other comprehensive income. Realized gains and losses and declines in fair value deemed to be other-than-temporary are recognized in net earnings immediately. During fiscal 2010, we disposed of 10.9 million shares of CareFusion common stock, resulting in cash proceeds of $270.7 million and a pre-tax realized gain of $44.6 million.

(2)	Represents our cost investment in the net book value of CareFusion’s assets immediately following the Spin-Off adjusted for the sale of securities during fiscal 2010.

8.	LONG-TERM OBLIGATIONS AND OTHER SHORT-TERM BORROWINGS

Long-term obligations and other short-term borrowings consist of the following as of June 30, 2010 and 2009:


	June 30,
(in millions)	2010		2009
4.00% Notes due 2015	$	534.7	$	523.8
5.50% Notes due 2013		305.1		300.0
5.65% Notes due 2012		216.1		317.1
5.80% Notes due 2016		308.9		526.4
5.85% Notes due 2017		158.0		500.0
6.00% Notes due 2017		213.1		350.4
6.75% Notes due 2011		218.7		494.6
7.80% Debentures due 2016		44.1		75.7
7.00% Debentures due 2026		124.5		192.0
Floating Rate Notes due 2009		0.0		350.0
Other obligations		6.1		7.8

Total	$	2,129.3	$	3,637.8
Less: current portion and other short-term borrowings		233.2		366.2

Long-term obligations, less current portion	$	1,896.1	$	3,271.6

The 4.00%, 5.50% 5.65%, 5.80%, 5.85%, 6.00% and 6.75% Notes and the Floating Rate Notes due 2009 represent unsecured obligations. The 7.80% and 7.00% Debentures represent unsecured obligations of Allegiance Corporation (a wholly-owned subsidiary), which Cardinal Health, Inc. has guaranteed. None of these obligations are subject to a sinking fund and the Allegiance obligations are not redeemable prior to maturity. Interest is paid pursuant to the terms of the obligations. These notes are effectively subordinated to the liabilities of our subsidiaries, including trade payables of $9.5 billion.

On September 24, 2009, we completed a debt tender announced on August 27, 2009 for an aggregate purchase price, including an early tender premium but excluding accrued interest, fees and expenses, of $1.1 billion of the following series of debt securities: (i) 7.80% Debentures due October 15, 2016 of Allegiance Corporation; (ii) our 6.75% Notes due February 15, 2011; (iii) our 6.00% Notes due June 15, 2017; (iv) 7.00% Debentures due October 15, 2026 of Allegiance Corporation; (v) our 5.85% Notes due December 15, 2017; (vi) our 5.80% Notes due October 15, 2016; (vii) our 5.65% Notes due June 15, 2012; (viii) our 5.50% Notes due June 15, 2013; and (ix) our 4.00% Notes due June 15, 2015. In connection with the debt tender, we incurred a pre-tax loss for the early extinguishment of debt of approximately $39.9 million, which included an early tender premium of $66.4 million, the write-off of $5.3 million of unamortized debt issuance costs, and an offsetting $31.8 million fair value adjustment to the respective debt related to previously terminated interest rate swaps. The debt tender was completed using a portion of the $1.4 billion of cash distributed to us from CareFusion in connection with the Spin-Off.

In June 2008, we sold $300 million aggregate principal amount of fixed rate notes due 2013 (“the 2013 Notes”) in a registered offering. The 2013 Notes mature on June 15, 2013. Interest on the 2013 Notes accrues at 5.50% per year payable semi-annually. If we experience specific types of change of control and the notes are rated below investment grade by S&P, Moody’s, and Fitch, we will be required to offer to purchase the 2013 Notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. We used the proceeds to repay $150.0 million of 6.25% Notes due 2008 on July 15, 2008 and to repay $149.0 million of preferred debt securities on October 3, 2008.

In addition to cash and equivalents, at June 30, 2010 and 2009, our sources of liquidity included a $1.5 billion commercial paper program backed by a $1.5 billion revolving credit facility. The revolving credit facility exists largely to support issuances of commercial paper as well as other short-term borrowings for general corporate purposes and remained unused at June 30, 2010 and 2009, except for $48.2 million and $70.2 million, respectively, of standby letters of credit. On April 16, 2009, in connection with the Spin-Off, we amended our $1.5 billion revolving credit facility to, among other things, replace a minimum net worth covenant with covenants that require us to maintain a consolidated interest coverage ratio as of the end of any fiscal quarter of at least 4-to-1 and to maintain a consolidated leverage ratio of no more than 3.25-to-1. The new covenants became effective upon Spin-Off. As of June 30, 2010, we were in compliance with these financial covenants.

We also maintain other short-term credit facilities and an unsecured line of credit that allowed for borrowings up to $4.8 million and $48.9 million at June 30, 2010 and 2009, respectively. At June 30, 2009, $15.7 million was outstanding under uncommitted facilities, all of which related to CareFusion; there was no amount outstanding at June 30, 2010. The $6.1 million and $7.8 million balance of other obligations at June 30, 2010, and 2009, respectively, consisted primarily of additional notes, loans and capital leases.

Maturities of long-term obligations and other short-term borrowings for the next five fiscal years and thereafter are as follows:


(in millions)	2011		2012		2013		2014		2015		Thereafter		Total
Maturities of long-term obligations and other short-term borrowings	$	233.2	$	214.1	$	306.8	$	1.2	$	530.9	$	843.1	$	2,129.3

9.	INCOME TAXES

Earnings before income taxes and discontinued operations are as follows for fiscal 2010, 2009 and 2008:


	Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
U.S. Operations	$	979.6	$	959.2	$	894.0
Non-U.S. Operations		232.0		200.6		401.1

	$	1,211.6	$	1,159.8	$	1,295.1

The provision for income taxes from continuing operations consists of the following for fiscal 2010, 2009 and 2008:


	Fiscal Year Ended June 30,
(in millions)	2010			2009		2008
Current:
Federal	$	429.4		$	192.2	$	374.8
State and local		63.3			45.6		91.4
Non-U.S.		11.7			14.4		18.6

Total		504.4			252.2		484.8
Deferred:
Federal		103.0			125.0		(64.3	)
State and local		18.2			23.0		36.0
Non-U.S.		(1.0	)		1.4		(8.6	)

Total		120.2			149.4		(36.9	)

Total provision	$	624.6		$	401.6	$	447.9

A reconciliation of the provision based on the federal statutory income tax rate to our effective income tax rate from continuing operations is as follows for fiscal 2010, 2009 and 2008:


	Fiscal Year Ended June 30,
	2010		2009		2008
Provision at Federal statutory rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal benefit	4.7		1.8		4.4
Foreign tax rate differential	(2.0	)	(3.8	)	(7.2	)
Nondeductible/nontaxable items	0.2		1.6		1.6
Deferred state tax rate adjustment	(0.5	)	1.5		2.0
Capital gain from repatriation	0.0		0.0		3.7
Valuation allowances	(2.3	)	(3.1	)	(3.7	)
Unremitted foreign earnings	13.9		0.0		0.0
Other	2.6		1.6		(1.2	)

Effective income tax rate	51.6	%	34.6	%	34.6	%

As of June 30, 2010 we had $2.0 billion of total undistributed earnings from non-U.S. subsidiaries of which $1.3 billion are intended to be permanently reinvested in non-U.S. operations. We recorded a charge of $168 million during fiscal 2010 to reflect the anticipated repatriation of certain foreign earnings. With respect to the earnings that are considered permanently reinvested, no U.S. tax provision has been accrued related to the repatriation of these earnings. It is not practicable to estimate the amount of U.S. tax that might be payable on the eventual remittance of such earnings.

During fiscal 2008, we repatriated cash of $307.5 million from non-U.S. subsidiaries. As a result, we incurred taxable dividends of $14.4 million, nontaxable return of capital/currency gain of $161.3 million and taxable capital gain of $131.8 million. The taxable capital gain amount of $131.8 million was fully offset with a previously unrecognized capital loss carryforward, and foreign tax credits of $14.1 million were recognized related to the taxable dividends resulting in a net tax benefit of $4.1 million.

Deferred income taxes arise from temporary differences between financial reporting and tax reporting bases of assets and liabilities, and operating loss and tax credit carryforwards for tax purposes. The components of the deferred income tax assets and liabilities as of June 30, 2010 and 2009 are as follows (in millions):


	June 30,
(in millions)	2010			2009
Deferred income tax assets:
Receivable basis difference	$	43.5		$	41.6
Accrued liabilities		132.1			174.2
Share-based compensation		112.6			118.2
Loss and tax credit carryforwards		206.1			202.4
Deferred tax assets related to uncertain tax positions		152.7			161.9
Other		113.2			75.3

Total deferred income tax assets		760.2			773.6
Valuation allowance for deferred income tax assets		(182.6	)		(151.9	)

Net deferred income tax assets		577.6			621.7

Deferred income tax liabilities:
Inventory basis differences		(878.7	)		(824.2	)
Property-related		(156.8	)		(73.6	)
Goodwill and other intangibles		(66.1	)		(368.2	)
Revenues on lease contracts		(2.5	)		(497.1	)
Unremitted foreign earnings		(142.0	)		0.0
Other		(1.2	)		(3.3	)

Total deferred income tax liabilities		(1,247.3	)		(1,766.4	)

Net deferred income tax liabilities	$	(669.7	)	$	(1,144.7	)

Deferred tax assets and liabilities in the preceding table, after netting by taxing jurisdiction, are in the following captions in the consolidated balance sheet at June 30, 2010 and 2009 (in millions):


	June 30,
	2010			2009
Current deferred tax asset (1)	$	42.5		$	6.6
Non current deferred tax asset (2)		3.5			15.3
Discontinued operations net deferred tax asset (3)		0.0			24.8
Current deferred tax liability (4)		(616.8	)		(641.8	)
Non current deferred tax asset (liability) (5)		(98.9	)		16.4
Discontinued Operations net deferred tax liability (6)		(0.0	)		(566.0	)

Net deferred tax liability	$	(669.7	)	$	(1,144.7	)

(1)	Included in “Prepaid Expenses and Other.”

(2)	Included in “Other Assets.”

(3)	Included in “Assets from Business Held for Sale and Discontinued Operations.”

(4)	Included in “Other Accrued Liabilities.”

(5)	Included in “Deferred Income Taxes and Other Liabilities.”

(6)	Included in “Liabilities from Business Held for Sale and Discontinued Operations.”

At June 30, 2010, we had gross federal, state and international loss and credit carryforwards of $159.1 million, $538.9 million and $168.6 million, respectively, the tax effect of which is an aggregate deferred tax asset of $197.1 million. Substantially all of these carryforwards are available for at least three years or have an indefinite carryforward period. Approximately $142.7 million of the valuation allowance at June 30, 2010 applies to certain federal, state and international loss carryforwards that, in our opinion, are more likely than not to expire unutilized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance would reduce income tax expense.

Effective July 1, 2007, we adopted new accounting guidance regarding the accounting for tax benefits from uncertain tax positions, resulting in a $139.3 million reduction of retained earnings. This accounting guidance provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The amount recognized is measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. This interpretation also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

We had $730.6 million and $848.8 million of unrecognized tax benefits at June 30, 2010 and June 30, 2009, respectively. Included in the June 30, 2010 and June 30, 2009 balances are $311.3 million and $610.9 million, respectively, of unrecognized tax benefits that, if recognized, would have an impact on the effective tax rate. The remaining unrecognized tax benefits relate to tax positions for which ultimate deductibility is highly certain but for which there is uncertainty as to the timing of such deductibility. Recognition of these tax benefits would not affect our effective tax rate. We include the full amount of unrecognized tax benefits in deferred income taxes and other liabilities in the consolidated balance sheets. A reconciliation of the beginning and ending amounts of unrecognized tax benefits for fiscal 2010 and 2009 is as follows:


	June 30,
(in millions)	2010			2009			2008
Balance at beginning of fiscal year	$	848.8		$	762.9		$	596.6
Additions for tax positions of the current year		43.1			64.5			83.3
Additions for tax positions of prior years		90.0			118.7			189.4
Reductions for tax positions of prior years		(240.0	)		(54.3	)		(75.6	)
Settlements with tax authorities		(10.7	)		(37.8	)		(7.8	)
Expiration of the statute of limitations		(0.6	)		(5.2	)		(23.0	)

Balance at end of fiscal year	$	730.6		$	848.8		$	762.9

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of June 30, 2010 and June 30, 2009, we had $233.0 million and $246.8 million, respectively, accrued for the payment of interest and penalties. These balances are gross amounts before any tax benefits and are included in deferred income taxes and other liabilities in the consolidated balance sheets. For the year ended June 30, 2010, we recognized $34.5 million of interest and penalties in income tax expense.

We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. With few exceptions, we are subject to audit by taxing authorities for fiscal 2001 through the current fiscal year.

The Internal Revenue Service (“IRS”) currently has ongoing audits of fiscal 2001 through 2007. During fiscal 2008, we were notified that the IRS has transferred jurisdiction over fiscal years 2001 and 2002 from the Office of Appeals back to the Examinations level to reconsider previously-unadjusted specific issues. During fiscal 2008, we received Notices of Proposed Adjustment (“NPA’s”) from the IRS related to fiscal years 2001 through 2005 challenging deductions arising from the sale of trade receivables to a special purpose accounts

receivable and financing entity. The amount of additional tax, excluding penalties and interest, proposed by the IRS in these notices was $178.9 million. We anticipate that this transaction could be the subject of proposed adjustments by the IRS in tax audits of fiscal years 2006 to 2009. Due to the anticipated repatriation of the earnings, the tax associated with the transaction, including the tax assessed by the IRS, no longer represented an uncertain tax benefit during fiscal 2010 and, as such, was classified as deferred taxes and other liabilities or current taxes payable in the balance sheet.

During fiscal 2009, we received a Revenue Agent’s Report for tax years 2003 through 2005, which included new NPA’s related to our transfer pricing arrangements between foreign and domestic subsidiaries and the transfer of intellectual property among subsidiaries of an acquired entity prior to its acquisition by us. The amount of additional tax proposed by the IRS in the new notices total $598.1 million, excluding penalties and interest, but including $462.1 million related to issues for which CareFusion is liable under the tax matters agreement in the event the amount must be paid to the taxing authority. We disagree with these proposed adjustments and intend to vigorously contest them. We believe that we are adequately reserved for the uncertain tax position relating to these matters.

It is reasonably possible that there could be a change in the amount of unrecognized tax benefits within the next 12 months due to activities of the IRS or other taxing authorities, including proposed assessments of additional tax, possible settlement of audit issues, or the expiration of applicable statutes of limitations. We estimate that the range of the possible change in unrecognized tax benefits within the next 12 months is a decrease of approximately zero to $45 million exclusive of penalties and interest.

10.

COMMITMENTS, CONTINGENT LIABILITIES AND LITIGATION

Commitments

The future minimum rental payments for operating leases having initial or remaining non-cancelable lease terms in excess of one year at June 30, 2010 are:


(in millions)	2011		2012		2013		2014		2015		Thereafter		Total
Minimum rental payments	$	65.8	$	53.3	$	40.2	$	21.7	$	14.2	$	26.2	$	221.4

Rental expense relating to operating leases was $80.3 million, $84.7 million and $55.7 million in fiscal 2010, 2009 and 2008, respectively. Sublease rental income was not material for any period presented herein.

Legal Proceedings

We become involved from time-to-time in litigation and regulatory matters incidental to our business, including governmental investigations, enforcement actions, personal injury claims, employment matters, commercial disputes, intellectual property matters, disputes regarding environmental clean-up costs, litigation in connection with acquisitions and divestitures, and other matters arising out of the normal conduct of the business. We intend to vigorously defend ourselves against such litigation. We do not believe that the outcome of any pending litigation will have a material adverse effect on the consolidated financial statements.

Occasionally, we may suspect that products we manufacture, market or distribute do not meet our specifications, published standards or regulatory requirements. In such circumstances, we will investigate and take appropriate corrective action. Such actions can lead to costs to repair or replace affected products, temporary interruptions in product sales, and action by regulators.

We accrue for contingencies related to litigation and regulatory matters. We will accrue an estimated loss contingency in our consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable

resolutions can occur, assessing contingencies is highly subjective and requires judgments about future events. We regularly review contingencies to determine whether our accruals are adequate. The amount of ultimate loss may differ from these estimates.

We recognize income from the favorable outcome of litigation when we receive the associated cash or assets.

We recognize estimated loss contingencies for litigation and regulatory matters and income from favorable resolution of litigation in litigation (credits)/charges, net in our consolidated statements of earnings.

Insurance Proceeds

In fiscal 2010, we recognized $27.2 million of income related to insurance proceeds released from escrow following the resolution of securities and derivative litigation against certain of our directors and officers. This amount is comprised of $25.7 million received from directors and officers’ insurance policies recognized in litigation (credits)/charges, net and $1.5 million of accrued interest income recognized in interest expense, net. In fiscal 2008, we recognized $58.0 million of income related to settlement of several derivative actions against directors and officers. This amount is comprised of $70.0 million received from the directors and officers’ insurance policies less $12.0 million paid for the plaintiffs’ attorneys’ fees and costs. These amounts are recognized in litigation (credits)/charges, net. For more information about this matter, see our Annual Reports on Form 10-K for fiscal 2008 and 2007.

Antitrust Litigation Proceeds

In fiscal 2010, we recognized $40.8 million of income resulting from settlement of a class action antitrust claim alleging that a defendant branded pharmaceutical manufacturer took improper actions to delay the entry of a generic version of a branded pharmaceutical. This amount is recognized in litigation (credits)/charges, net.

Income Taxes

See Note 9 for discussion of contingencies related to our income taxes.

11.

GUARANTEES

In the ordinary course of business, we agree to indemnify certain other parties under acquisition and disposition agreements, customer agreements, intellectual property licensing agreements and other agreements. Such indemnification obligations vary in scope and, when defined, in duration. In many cases, a maximum obligation is not explicitly stated and therefore the overall maximum amount of the liability under such indemnification obligations cannot be reasonably estimated. Where appropriate, such indemnification obligations are recorded as a liability. Historically, we have not, individually or in the aggregate, made payments under these indemnification obligations in any material amounts. In certain circumstances, we believe that existing insurance arrangements, subject to the general deduction and exclusion provisions, would cover portions of the liability that may arise from these indemnification obligations. In addition, we believe that the likelihood of a material liability being triggered under these indemnification obligations is not significant.

We enter into agreements that obligate us to make fixed payments upon the occurrence of certain events. Such obligations primarily relate to obligations arising under acquisition transactions, where we have agreed to make payments based upon the achievement of certain financial performance measures by the acquired business. Generally, the obligation is capped at an explicit amount. As of June 30, 2010, our aggregate exposure for these obligations, assuming the achievement of all financial performance measures, was not material. However, in connection with our purchase of Healthcare Solutions Holding, LLC in July 2010, we are obligated to pay up to $150.0 million in contingent consideration.

We also extend loans to our customers which are subsequently sold to a bank. The bank services and administers these loans as well as any new loans we may direct. In order for the bank to purchase such loans, it requires the absolute and unconditional obligation that we repurchase such loans upon the occurrence of certain events described in the agreement including, but not limited to, borrower payment default that exceeds 90 days, insolvency and bankruptcy. At June 30, 2010 and 2009, notes in the program subject to our guaranty totaled $41.4 million and $39.9 million, respectively. These loans are reported in our consolidated balance sheets.

12.

FINANCIAL INSTRUMENTS

We utilize derivative financial instruments to manage exposure to certain risks related to our ongoing operations. The primary risks managed through the use of derivative instruments include interest rate risk, currency exchange risk and commodity price risk. We do not use derivative instruments for trading or speculative purposes. While the majority of our derivative instruments are designated as hedging instruments, we also enter into derivative instruments that are designed to hedge a risk, but are not designated as hedging instruments. These derivative instruments are adjusted to current fair value through earnings at the end of each period.

Interest Rate Risk Management. We are exposed to the impact of interest rate changes. Our objective is to manage the impact of interest rate changes on cash flows and the market value of our borrowings. We utilize a mix of debt maturities along with both fixed-rate and variable-rate debt to manage changes in interest rates. In addition, we enter into interest rate swaps to further manage our exposure to interest rate variations related to our borrowings and to lower our overall borrowing costs.

Currency Risk Management. We conduct business in several major international currencies and are subject to risks associated with changing foreign exchange rates. Our objective is to reduce earnings and cash flow volatility associated with foreign exchange rate changes to allow management to focus its attention on business operations. Accordingly, we enter into various contracts that change in value as foreign exchange rates change to protect the value of existing foreign currency assets and liabilities, commitments and anticipated foreign currency revenue and expenses.

Commodity Price Risk Management. We are exposed to changes in the price of certain commodities. Our objective is to reduce earnings and cash flow volatility associated with forecasted purchases of these commodities to allow management to focus its attention on business operations. Accordingly, we enter into derivative contracts to manage the price risk associated with these forecasted purchases.

We are exposed to counterparty credit risk on all of our derivative instruments. Accordingly, we have established and maintain strict counterparty credit guidelines and enter into derivative instruments only with major financial institutions that are investment grade or better. We do not have significant exposure to any one counterparty and management believes the risk of loss is remote and, in any event, would not be material. Additionally, we do not require collateral under these agreements.

The following table summarizes the fair value of our assets and liabilities related to derivative financial instruments, and the respective line items in which they were recorded in the consolidated balance sheets as of June 30, 2010 and 2009:


(in millions)	Balance Sheet Location	June 30, 2010		June 30, 2009
Assets:
Derivatives designated as hedging instruments:
Pay-floating interest rate swaps	Prepaid expenses and other	$	23.4	$	0.0
Foreign currency contracts	Prepaid expenses and other		3.9		0.4
Commodity contracts	Prepaid expenses and other		0.0		1.2

Total			27.3		1.6

Derivatives not designated as hedging instruments:
Foreign currency contracts	Other long-term assets		0.0		64.5

Total assets		$	27.3	$	66.1

Liabilities:
Derivatives designated as hedging instruments:
Pay-fixed interest rate swaps	Other accrued liabilities	$	0.0	$	3.7
Foreign currency contracts	Deferred income taxes and other liabilities		1.1		2.9

Total liabilities		$	1.1	$	6.6

Fair Value Hedges

We enter into pay-floating interest rate swaps to hedge the changes in the fair value of fixed-rate debt resulting from fluctuations in interest rates. These contracts are designated and qualify as fair value hedges. Accordingly, the gain or loss recorded on the pay-floating interest rate swaps is directly offset by the change in fair value of the underlying debt. Both the derivative instrument and the underlying debt are adjusted to market value at the end of each period with any resulting gain or loss recorded in interest expense, net in the consolidated statements of earnings.

During fiscal 2010, we entered into pay-floating interest rate swaps with a total notional value of $1,006.0 million. The fair value of these pay-floating interest rate swaps is included in the consolidated balance sheet as of June 30, 2010.

On March 20, 2009, we terminated all of our then existing pay-floating interest rate swaps and received net settlement proceeds totaling $123.1 million. These proceeds are classified as cash provided by operating activities in the consolidated statements of cash flows. There was no immediate impact to the statements of earnings; however, the fair value adjustment to debt will be amortized over the life of the underlying debt as a reduction to interest expense in conjunction with the occurrence of the originally forecasted transactions.

The following table summarizes the interest rate swaps designated as fair value hedges outstanding as of June 30, 2010 and June 30, 2009:


	June 30, 2010			June 30, 2009
(in millions)	Notional Amount		Maturity Date	Notional Amount		Maturity Date
Pay-floating interest rate swaps	$	1,006.0	June 2012 – June 2015	$	0.0	—

The following table summarizes the gain/(loss) recognized in earnings for interest rate swaps designated as fair value hedges for fiscal 2010, 2009 and 2008:


		Fiscal Year Ended June 30,
(in millions)	Statements of Earnings Location	2010			2009			2008
Pay-floating interest rate swaps	Interest expense, net	$	47.3		$	21.6		$	4.2
Fixed-rate debt	Interest expense, net		(47.3	)		(21.6	)		(4.2	)

There was no ineffectiveness associated with these derivative instruments.

Cash Flow Hedges

We enter into derivative instruments to hedge our exposure to changes in cash flows attributable to currency, interest rate and commodity price fluctuations associated with certain forecasted transactions. These derivative instruments are designated and qualify as cash flow hedges. Accordingly, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative instrument is recognized in earnings immediately.

We enter into pay-fixed interest rate swaps to hedge the variability of cash flows relating to interest rate payments on our variable rate debt. At June 30, 2009, we held pay-fixed interest rate swaps to hedge the variability of cash flows relating to these forecasted transactions. On October 2, 2009, these pay-fixed interest rate swaps matured with the underlying floating-rate debt. The maturation of the pay-fixed interest rate swaps led to a zero balance for fiscal 2010.

We enter into foreign currency contracts to protect the value of anticipated foreign currency revenues and expenses. At June 30, 2010 and 2009, we held contracts to hedge probable, but not firmly committed, revenue and expenses. The principal currencies hedged are the Canadian dollar, European euro, Mexican peso and Thai baht.

We enter into derivative contracts to manage the price risk associated with forecasted purchases of certain commodities used in our Medical segment.

The following table summarizes the outstanding cash flow hedges as of June 30, 2010 and 2009:


	June 30, 2010			June 30, 2009
(in millions)	Notional Amount		Maturity Date	Notional Amount		Maturity Date
Pay-fixed interest rate swaps	$	0.0	—	$	350.0	October 2009
Foreign currency contracts		145.7	July 2010 – June 2011		156.7	July 2009 – June 2010
Commodity contracts		24.2	July 2010 – June 2013		14.5	July 2009 – December 2011

The following table summarizes the accumulated gain/(loss) recognized in OCI for derivative instruments designated as cash flow hedges as of June 30, 2010 and 2009:


	June 30,
(in millions)	2010		2009
Pay-fixed interest rate swaps	$	0.0	$	(3.7	)
Foreign currency contracts (1)		2.6		(6.9	)
Commodity contracts		0.0		1.2

(1)	Includes gain/(loss) recognized in OCI related to CareFusion of $(4.1) million and $0.2 million for fiscal 2009 and 2008, respectively.

The following table summarizes the gain/(loss) reclassified from accumulated OCI into earnings for derivative instruments designated as cash flow hedges for fiscal 2010, 2009 and 2008:


		Fiscal Year Ended June 30,
(in millions)	Statements of Earnings Location	2010			2009			2008
Pay-fixed interest rate swaps	Interest expense, net	$	(2.1	)	$	(7.6	)	$	(3.0	)
Foreign currency contracts	Cost of products sold		(10.5	)		10.9			(15.2	)
Foreign currency contracts	SG&A expenses		1.4			(4.0	)		2.3
Commodity contracts	SG&A expenses		0.2			(0.6	)		0.0

The amount of ineffectiveness associated with these derivative instruments was not material.

Economic (Non-designated) Hedges

We enter into foreign currency contracts to manage our foreign exchange exposure related to intercompany financing transactions and other balance sheet items subject to revaluation that do not meet the requirements for hedge accounting treatment. Accordingly, these derivative instruments are adjusted to current market value at the end of each period through earnings. The gain or loss recorded on these instruments is substantially offset by the remeasurement adjustment on the foreign currency denominated asset or liability. The settlement of the derivative instrument and the remeasurement adjustment on the foreign currency denominated asset or liability are both recorded in other (income)/expense, net at the end of each period. During fiscal 2010, we received cash receipts from a cross currency swap settlement totaling $42.5 million. These proceeds are classified as cash provided by operating activities in the consolidated statement of cash flows.

The following table summarizes the economic (non-designated) derivative instruments outstanding as of June 30, 2010 and 2009:


	June 30, 2010			June 30, 2009
(in millions)	Notional Amount		Maturity Date	Notional Amount		Maturity Date
Foreign currency contracts	$	472.6	July 2010	$	531.3	July 2009 – December 2013

The following table summarizes the gain/(loss) recognized in earnings for economic (non-designated) derivative instruments for fiscal 2010, 2009 and 2008:


		Fiscal Year Ended June 30,
(in millions)	Statements of Earnings Location	2010		2009			2008
Foreign currency contracts	Other income/expense, net	$	23.7	$	(8.6	)	$	5.1

Fair Value of Financial Instruments

The carrying amounts of cash and equivalents, trade receivables, accounts payable, other short-term borrowings and other accrued liabilities at June 30, 2010 and 2009 approximate their fair value because of the short-term maturities of these items.

Cash balances are invested in accordance with our investment policy. These investments are exposed to market risk from interest rate fluctuations and credit risk from the underlying issuers, although this is mitigated through diversification.

The following table summarizes the estimated fair value of our long-term obligations and other short-term borrowings compared to the respective carrying amounts at June 30, 2010 and 2009:


	June 30,
	2010		2009
Long-term obligations and other short-term borrowings	$	2,310.4	$	3,428.8
Carrying amount		2,129.3		3,637.8

The fair value of our long-term obligations and other short-term borrowings is estimated based on either the quoted market prices for the same or similar issues or other inputs derived from available market information.

The following is a summary of the fair value gain/(loss) of our derivative instruments, based upon the estimated amount that we would receive (or pay) to terminate the contracts as of June 30, 2010 and 2009. The fair values are based on quoted market prices for the same or similar instruments.


	June 30, 2010				June 30, 2009
(in millions)	Notional Amount		Fair Value Gain/(Loss)		Notional Amount		Fair Value Gain/(Loss)
Interest rate swaps	$	1,006.0	$	23.4	$	350.0	$	(3.7	)
Foreign currency contracts		618.3		2.8		688.0		62.0
Commodity contracts		24.2		0.0		14.5		1.2

See Note 13 for further information regarding fair value measurements.

13.

FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received upon selling an asset or the price paid to transfer a liability on the measurement date. It focuses on the exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:


Level 1	–	Observable prices in active markets for identical assets and liabilities.

Level 2	–	Observable inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3	–	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.

Recurring Fair Value Measurements

The following table presents the fair values for those assets and (liabilities) measured on a recurring basis as of June 30, 2010:


	Fair Value Measurements
(in millions)	Level 1		Level 2		Level 3		Total
Cash Equivalents (1)	$	2,019.0	$	0.0	$	0.0	$	2,019.0
Investment in CareFusion (2)		691.5		0.0		0.0		691.5
Foreign Currency Contracts (3)		0.0		2.8		0.0		2.8
Interest Rate Swaps (3)		0.0		23.4		0.0		23.4
Other Investments (4)		71.3		0.0		0.0		71.3

Total	$	2,781.8	$	26.2	$	0.0	$	2,808.0

The following table presents the fair values for those assets and (liabilities) measured on a recurring basis as of June 30, 2009:


	Fair Value Measurements
(in millions)	Level 1		Level 2			Level 3		Total
Cash Equivalents (1)	$	628.3	$	0.0		$	0.0	$	628.3
Foreign Currency Contracts (3)		0.0		62.0			0.0		62.0
Commodity Contracts (3)		0.0		1.2			0.0		1.2
Interest Rate Swaps (3)		0.0		(3.7	)		0.0		(3.7	)
Other Investments (4)		68.1		0.0			0.0		68.1

Total	$	696.4	$	59.5		$	0.0	$	755.9

(1)	Cash equivalents are comprised of highly liquid investments purchased with a maturity of three months or less. The carrying value of these cash equivalents approximates fair value due to their short-term maturities.

(2)	The fair value of our investment in CareFusion common stock is determined using the quoted market price of the security.

(3)

The fair value of foreign currency contracts, commodity contracts and interest rate swaps is determined based on the present value of expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Observable Level 2 inputs are used to determine the present value of expected future cash flows. See Note 12 for further information regarding the fair value of financial instruments.

(4)

The other investments balance includes investments in mutual funds, which are used to offset fluctuations in deferred compensation liabilities. These mutual funds are primarily comprised of large cap domestic and international equity securities. The fair value of these investments is determined using quoted market prices.

14.

SHAREHOLDERS’ EQUITY

At June 30, 2010 and 2009, authorized capital shares consisted of the following: 750 million Class A common shares, without par value; 5 million Class B common shares, without par value; and 0.5 million non-voting preferred shares, without par value. The Class A common shares and Class B common shares are collectively referred to below as “Common Shares.” Holders of Common Shares are entitled to share equally in any dividends declared by the Board of Directors and to participate equally in all distributions of assets upon liquidation. Generally, the holders of Class A common shares are entitled to one vote per share and the holders of Class B common shares are entitled to one-fifth of one vote per share on proposals presented to shareholders for vote. Under certain circumstances, the holders of Class B common shares are entitled to vote as a separate class. Only Class A common shares were outstanding as of June 30, 2010 and 2009.

We repurchased $1.3 billion of our Common Shares, in aggregate, through share repurchase programs during fiscal 2010, 2009 and 2008, as described below.

Fiscal 2010 . During fiscal 2010, we repurchased 7.4 million Common Shares having an aggregate cost of $250.0 million, which included $19.8 million in unsettled repurchases at June 30, 2010. The average price paid per common share for all Common Shares repurchased during fiscal 2010 was $33.85.

Fiscal 2009 . We did not repurchase any Common Shares during fiscal 2009.

Fiscal 2008 . We repurchased 16.8 million Common Shares having an aggregate cost of $1.1 billion during fiscal 2008. The average price paid per common share for all Common Shares repurchased during fiscal 2008 was $64.81.

The Common Shares repurchased were held in treasury to be used for general corporate purposes. During fiscal 2008, we retired 128 million Common Shares in treasury. The retirement of these shares had no impact on

total shareholders’ equity; however, it did impact certain of the individual components of shareholders’ equity as follows: $1.0 billion decrease in Common Shares, $7.5 billion decrease in retained earnings and $8.5 billion decrease in Common Shares in treasury.

15.

EARNINGS PER SHARE

Basic earnings per Common Share (“Basic EPS”) is computed by dividing net earnings (the numerator) by the weighted average number of Common Shares outstanding during each period (the denominator). Diluted earnings per Common Share (“Diluted EPS”) is similar to the computation for Basic EPS, except that the denominator is increased by the dilutive effect of vested and unvested stock options, restricted shares, and restricted share units computed using the treasury stock method. The total number of Common Shares issued less the Common Shares held in treasury is used to determine the Common Shares outstanding.

The following table reconciles the number of Common Shares used to compute Basic EPS and Diluted EPS for fiscal 2010, 2009 and 2008:


	Fiscal Year Ended June 30,
(in millions)	2010	2009	2008
Weighted-average Common Shares–basic	358.8	357.6	358.2
Effect of dilutive securities:
Employee stock options, restricted shares and restricted share units	2.6	3.9	5.8

Weighted-average Common Shares–diluted	361.4	361.5	364.0

The following table presents the number of potentially dilutive securities that were anti-dilutive for fiscal 2010, 2009 and 2008:

16.

SEGMENT INFORMATION

Our operations are principally managed on a products and services basis. In connection with the Spin-Off, we reorganized our businesses into two reportable segments—Pharmaceutical and Medical. The factors for determining the reportable segments include the manner in which management evaluates our performance combined with the nature of the individual business activities.

The Pharmaceutical segment distributes branded and generic pharmaceutical, over-the-counter healthcare and consumer products. It also operates nuclear pharmacies and cyclotron facilities that prepare and deliver radiopharmaceuticals for use in nuclear imaging and other procedures in hospitals and clinics. In addition, this segment: distributes specialty pharmaceutical products and provides third-party logistics support services to hospitals, clinics, and other providers; franchises retail pharmacies under the Medicine Shoppe ^® and Medicap ^® brands; and provides pharmacy services to hospitals and other healthcare facilities. This segment also provides pharmaceutical repackaging services; helps pharmaceutical manufacturers with services including distribution, inventory management, data/reporting, new product launch support, and contract and chargeback administration; and maintains prime vendor relationships that streamline the purchasing process resulting in greater efficiency and lower costs for our customers.

procedure kits; single-use surgical drapes, gowns and apparel; exam and surgical gloves; and fluid suction and collection systems. Our medical and surgical products are sold directly or through third-party distributors in the United States, Canada, Europe, South America and the Asia/Pacific region.

The following table includes revenue for each reportable segment and reconciling items necessary to agree to amounts reported in the consolidated financial statements:


	Fiscal Year Ended June 30,
(in millions)	2010			2009			2008
Segment revenue:
Pharmaceutical (1)	$	89,789.9		$	87,862.9		$	79,498.3
Medical (2)		8,750.1			8,159.3			7,916.7

Total segment revenue		98,540.0			96,022.2			87,415.0
Corporate (3)		(37.2	)		(30.7	)		(6.8	)

Total consolidated revenue	$	98,502.8		$	95,991.5		$	87,408.2

(1)	The Pharmaceutical segment’s revenue is primarily derived from the distribution of branded and generic pharmaceutical, over-the-counter healthcare, and consumer products.

(2)	The Medical segment’s revenue is primarily derived from the manufacturing and distribution of medical, surgical and laboratory products and medical procedure kits.

(3)	Corporate revenue consists of the elimination of inter-segment revenue.

We evaluate the performance of the segments based upon, among other things, segment profit. Segment profit is segment revenue less segment cost of products sold, less segment distribution, selling, general and administrative expense (“SG&A”). Segment SG&A expenses include equity share-based compensation expense as well as allocated corporate expenses for shared functions, including corporate management, corporate finance, financial shared services, human resources, information technology, legal and an integrated hospital sales organization. Corporate expenses are allocated to the segments based upon headcount, level of benefit provided and ratable allocation. Information about interest income and expense and income taxes is not provided at the segment level. In addition, restructuring and employee severance, acquisition related costs, impairments and (gain)/loss on sale of assets, litigation (credits)/charges, net, certain investment and other spending are not allocated to the segments. Investment spending generally includes the first year spend for certain projects that require incremental strategic investments in the form of additional operating expenses. We encourage our segments to identify investment projects that will promote innovation and provide future returns. As approval decisions for such projects are dependent upon executive management, the expenses for such projects are retained at Corporate. See Notes 2, 3, 4 and 10, respectively, for further discussion of our acquisition related costs, restructuring and employee severance, impairments and (gain)/loss on sale of assets and litigation (credits)/charges, net. In addition, Spin-Off costs included in SG&A of $10.8 million and $4.5 million for fiscal 2010 and 2009, respectively, are not allocated to our segments. The accounting policies of the segments are the same as those described in Note 1.

The following table includes segment profit by reportable segment and reconciling items necessary to agree to amounts reported in the consolidated financial statements:


	Fiscal Year Ended June 30,
(in millions)	2010			2009			2008
Segment profit:
Pharmaceutical	$	1,001.8		$	1,035.7		$	1,022.4
Medical		427.7			384.9			411.3

Total segment profit		1,429.5			1,420.6			1,433.7
Corporate		(122.6	)		(133.2	)		(41.3	)

Total consolidated operating earnings	$	1,306.9		$	1,287.4		$	1,392.4

The following tables include depreciation and amortization expense and capital expenditures for fiscal 2010, 2009 and 2008 for each segment:


	Depreciation and Amortization Expense
	Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Pharmaceutical	$	50.9	$	50.6	$	52.6
Medical		63.8		70.4		68.3
Corporate		139.7		104.8		99.1

Total depreciation and amortization expense	$	254.4	$	225.8	$	220.0


	Capital Expenditures
	Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Pharmaceutical	$	32.5	$	105.3	$	29.5
Medical		81.2		59.1		34.7
Corporate		146.6		256.8		124.3

Total capital expenditures	$	260.3	$	421.2	$	188.5

The following table includes total assets at June 30, 2010 and 2009 for each segment as well as reconciling items necessary to total the amounts reported in the consolidated financial statements:


	June 30,
(in millions)	2010		2009
Segment assets:
Pharmaceutical	$	12,102.9	$	12,638.9
Medical		3,867.5		3,759.8
Corporate (1)		4,019.8		8,720.1

Consolidated assets	$	19,990.2	$	25,118.8

(1)

The Corporate assets primarily consist of cash and equivalents, our investment in CareFusion, certain net property and equipment, and the contractual tax indemnification receivable from CareFusion (see Note 1 for further information regarding this receivable). Additionally, the Corporate assets as of June 30, 2009 included CareFusion assets and other assets held for sale and discontinued operations.

The following table presents revenue and net property and equipment by geographic area:


	Revenue						Property and Equipment, Net
	For the Fiscal Year Ended June 30,						June 30,
(in millions)	2010		2009		2008		2010		2009
United States	$	97,812.3	$	95,248.2	$	86,586.4	$	1,355.0	$	1,346.7
International		690.5		743.3		821.8		113.8		117.8

Total	$	98,502.8	$	95,991.5	$	87,408.2	$	1,468.8	$	1,464.5

17.

SHARE-BASED COMPENSATION AND SAVINGS PLANS

Share-Based Compensation Plans

We maintain stock incentive plans (collectively, the “Plans”) for the benefit of certain of our officers, directors and employees. Employee stock options granted under the Plans during fiscal 2008 through fiscal 2010 generally vest in equal annual installments over three years and are exercisable for periods up to seven years from the date of grant at a price equal to the market price of the Common Shares underlying the option at the date of grant. Employee stock options granted under the Plans during fiscal 2007 generally vest in equal annual installments over four years and are exercisable for periods up to seven years from the date of grant at a price equal to the market price of the Common Shares underlying the option at the date of grant. Employee restricted shares and restricted share units granted under the Plans during fiscal 2007 through fiscal 2010 generally vest in equal installments over three years and entitle holders to dividends or cash dividend equivalents. Restricted shares and restricted share units accrue dividends or cash dividend equivalents that are payable upon vesting of the awards.

The compensation expense recognized for all share-based compensation awards is net of estimated forfeitures and is recognized using the straight-line method over the applicable service period. We classify share-based compensation within SG&A expenses to correspond with the same line item as the majority of the cash compensation paid to employees. However, certain share-based compensation incurred in connection with the Spin-Off is classified within restructuring and employee severance.

The following table illustrates the impact of share-based compensation on reported amounts for fiscal 2010, 2009 and 2008:


	For the Fiscal Year Ended June 30,
(in millions)	2010 (1)			2009 (1)			2008 (1)(2)
Operating earnings (3)	$	(99.5	)	$	(109.9	)	$	(107.9	)
Earnings from continuing operations		(63.4	)		(72.6	)		(71.0	)
Net earnings (4)		(65.7	)		(86.7	)		(81.0	)
Net basic earnings per Common Share		(0.18	)		(0.24	)		(0.23	)
Net diluted earnings per Common Share		(0.18	)		(0.24	)		(0.22	)

(1)	Included in the table above are amounts recorded within restructuring and employee severance that related to the Spin-Off. The following provides those amounts for fiscal 2010, 2009 and 2008:


	For the Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Share-based compensation	$	15.6	$	7.5	$	0.0
Tax benefit		5.7		2.6		0.0

Total share-based compensation, net of tax	$	9.9	$	4.9	$	0.0

(2)	Fiscal 2008 share-based compensation expense includes $8.7 million related to the unvested equity awards held by our former Executive Director. The acceleration of the share-based compensation expense resulted from a change in status from an employee to a nonemployee director.

(3)	The following table provides total share-based compensation expense by type of award for fiscal 2010, 2009 and 2008:


	For the Fiscal Year Ended June 30,
(in millions)	2010		2009			2008
Restricted share and share unit expense	$	56.8	$	62.8		$	50.37
Employee stock option expense		41.0		36.6			53.1
Employee stock purchase plan expense		1.1		12.6			11.1
Stock appreciation right (income)/expense		0.6		(2.1	)		(6.6	)

Total share-based compensation	$	99.5	$	109.9		$	107.9

(4)	The following table provides total share-based compensation expense, net of tax, charged to discontinued operations during fiscal 2010, 2009 and 2008:


	For the Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Share-based compensation	$	3.8	$	20.4	$	14.4
Tax benefit		1.5		6.3		4.4

Total share-based compensation, net of tax	$	2.3	$	14.1	$	10.0

Stock Options

The fair value of stock options is determined using a lattice valuation model. We believe the lattice model provides for better estimates because it has the ability to take into account employee exercise patterns based on changes in our stock price and other variables and it provides for a range of input assumptions.

The following summarizes all stock option transactions under the Plans from July 1, 2008 through June 30, 2010, giving retroactive effect to conversions of options in connection with acquisitions and stock splits:


(in millions, except per share amounts)	Stock Options Outstanding (1)		Weighted Average Exercise Price per Common Share (2)		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value
Balance at June 30, 2008	32.1		$	58.81	4.6	$	90.0
Granted	2.3			54.35
Exercised	(1.1	)		34.41
Canceled and forfeited	(3.9	)		59.58

Balance at June 30, 2009	29.4			59.25	3.9	$	1.8

Granted	7.2			28.09
Exercised	(1.4	)		27.04
Canceled and forfeited	(11.1	)		62.46

Balance at June 30, 2010	24.1		$	37.88	3.9	$	56.9

Exercisable at June 30, 2010	15.6		$	42.33	3.0	$	7.9

(1)	The stock options granted, canceled and forfeited activity for fiscal 2010 included the impact of our stock option exchange program and the adjustments to outstanding stock options in connection with the Spin-Off as discussed below.

(2)	Exercise prices related to stock options have been adjusted in connection with the Spin-Off for dates after August 31, 2009, the effective date of the adjustments.

The following table provides data related to all stock option activity for fiscal 2010, 2009 and 2008:


(in millions, except per share data and years)	2010			2009			2008
Weighted-average grant date fair value per stock option (1)	$	6.44		$	13.67		$	17.82
Aggregate intrinsic value of exercised options		7.3			14.0			87.3
Cash received upon exercise		40.0			39.2			227.9
Cash tax proceeds/(disbursements) realized related to exercise		(16.1	)		(2.9	)		42.1
Total compensation cost, net of estimated forfeitures, related to unvested stock options not yet recognized, pre-tax		32.0			54.3			89.5
Weighted-average period in years over which stock option compensation cost is expected to be recognized		1.9			1.4			1.9

(1)	The weighted-average grant date fair value per stock option does not include the impact of our stock option exchange program.

The fair values of the stock options granted to our employees and directors during fiscal 2010, 2009 and 2008 were estimated on the date of grant using a lattice valuation model. The lattice valuation model incorporates ranges of assumptions that are disclosed in the table below. The risk-free rate is based on the United States Treasury yield curve at the time of the grant. We analyzed historical data to estimate option exercise behaviors and employee terminations to be used within the lattice model. During 2010, we calculated separate option valuations for two groups of employees. During fiscal 2009 and 2008, we calculated separate option valuations for three groups of employees. The groups were determined using similar historical exercise behaviors. The expected life of the options granted was calculated from the option valuation model and represents the length of time in years that the options granted are expected to be outstanding. The range of expected lives in the table below results from the separate groups of employees identified based on their option exercise behaviors. Expected volatilities are based on implied volatility from traded options on our Common Shares and historical volatility over a period of time commensurate with the contractual term of the option grant (7 years). The following table provides the range of assumptions used for options valued during fiscal 2010, 2009 and 2008:


	2010 (1)		2009		2008
Risk-free interest rate	1.93% – 2.47	%	1.52% – 3.48	%	2.1% – 4.8	%
Expected life in years	4.4 – 5.2		4.5 – 7.0		4.4 – 7.0
Expected volatility	32.0	%	27.0% – 30.0	%	27.0	%
Dividend yield	1.96% – 2.76	%	1.00% – 2.33	%	0.69% – 0.96	%

(1)	The range of assumptions used for options in fiscal 2010 does not include the impact of our stock option exchange program.

Restricted Shares and Restricted Share Units

The fair value of restricted shares and restricted share units is determined by the number of shares granted and the grant date market price of our Common Shares.

The following tables summarize all activity related to restricted shares and restricted share units during fiscal 2010 and 2009:


(in millions, except per share amounts)	Shares (1)		Weighted Average Grant Date Fair Value Per Share (2)
Nonvested at June 30, 2008	2.4		$	65.74
Granted	2.3			52.58
Vested	(1.2	)		64.38
Canceled and forfeited	(0.4	)		60.37

Nonvested at June 30, 2009	3.1			57.10
Granted	2.1			27.43
Vested	(1.6	)		51.11
Canceled and forfeited	(0.3	)		42.94

Nonvested at June 30, 2010	3.3			33.33

(1)	The restricted shares and restricted share units canceled and forfeited activity for fiscal 2010 included the impact of the adjustments to outstanding awards in connection with the Spin-Off as discussed below.

(2)	Grant date fair values per share of awards granted prior to the date of the Spin-Off have not been adjusted to reflect the impact of the Spin-Off.


	Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Total compensation cost, net of estimated forfeitures, related to nonvested restricted share and share unit awards not yet recognized, pre-tax	$	57.5	$	100.6	$	80.8
Weighted-average period in years over which restricted share and share unit cost is expected to be recognized		1.8		1.8		1.9

Stock Option Exchange Program

On May 6, 2009, the Board of Directors authorized, and on June 23, 2009, shareholders approved, a program that permitted certain current employees to exchange certain outstanding stock options with exercise prices substantially above the current market price of our Common Shares for a lesser number of stock options that have a fair value that is lower than the fair value of the “out of the money” options. The program began on June 19, 2009 and was completed on July 17, 2009. We believe that this program was necessary to more closely align employee and shareholder interests through equity compensation programs. The program was designed to motivate and retain key employees and to reinforce the alignment of our employees’ interests with those of our shareholders. As a result of this program, 9.8 million outstanding eligible stock options were exchanged for 1.4 million new options at an exercise price of $31.27. These new options have a new minimum vesting condition of an additional 12 months, and the term of each new option is the longer of three years from the grant date or the remaining term of the eligible stock option for which it was exchanged. The new options were treated as a probable-to-probable modification under the accounting guidance for share-based compensation. We did not incur incremental expense associated with the modification.

Adjustments to Stock Incentive Plans

In connection with the Spin-Off, on August 31, 2009, we adjusted share-based compensation awards granted under the Plans into awards based on our Common Shares and/or CareFusion common stock, as applicable. For purposes of the vesting of these equity awards, continued employment or service with us or with CareFusion is treated as continued employment for purposes of both our and CareFusion’s equity awards. The adjustments are summarized as follows:

•

We converted each of our stock options granted on or prior to September 26, 2007 into one of our adjusted stock options and a CareFusion stock option. The exercise prices of our adjusted stock options and the CareFusion stock option and the number of shares subject to these stock options reflected an adjustment designed so that the intrinsic value of the stock options held immediately following the Spin-Off equaled the intrinsic value of the stock options held immediately prior to the Spin-Off.

•

We adjusted the exercise price and number of shares of each of our stock options granted after September 26, 2007 to our current or former employees or directors so that the intrinsic value of the stock option held immediately following the Spin-Off equaled the intrinsic value of the stock option held immediately prior to the Spin-Off. Each of our stock options granted after September 26, 2007 to an employee or director who joined CareFusion in connection with the Spin-Off was replaced with a CareFusion stock option exercisable only for shares of CareFusion common stock with the exercise price and number of shares established so that the intrinsic value of the stock option held immediately following the Spin-Off equaled the intrinsic value of the stock option held immediately prior to the Spin-Off.

•

Holders of our restricted shares or restricted share units granted on or prior to September 26, 2007, granted in connection with the announcement of the Spin-Off or granted in exchange for an option initially granted prior to September 26, 2007, received shares of CareFusion restricted stock or CareFusion restricted stock units in the same ratio as our outstanding Common Shares in the Spin-Off (0.5 shares of CareFusion common stock for each Common Share). We did not adjust the our underlying restricted shares and restricted share units.

•

We adjusted (or canceled and reissued) other of our restricted shares or restricted share units (i.e. those not described above) so that the fair value of the shares subject to the awards held immediately

following the Spin-Off equaled the fair value of the awards held immediately prior to the Spin-Off. Our other restricted shares or restricted share units granted to employees or directors who joined CareFusion in connection with the Spin-Off were canceled and replaced with a number of shares of CareFusion restricted stock or CareFusion restricted stock units established so that the fair value of the shares subject to the awards held immediately following the Spin-Off equaled the fair value of the awards held immediately prior to the Spin-Off.

•

Our adjusted stock options, restricted shares, and restricted share units and the CareFusion stock options, restricted stock and restricted stock units that a holder received are subject to substantially the same terms, vesting conditions and other restrictions, if any, that were applicable prior to the Spin-Off.

The adjustments to stock incentive plans were treated as a modification in accordance with share-based compensation accounting guidance and resulted in a total incremental compensation cost of $0.6 million.

The following table summarizes the share-based compensation awards outstanding as of June 30, 2010:


	Our Awards		CareFusion Awards
(in millions)	Stock Options	Restricted Shares and Share Units	Stock Options	Restricted Shares and Share Units
Held by our employees and former employees	21.9	3.2	7.1	0.1
Held by CareFusion employees	2.2	0.1

Total	24.1	3.3

Employee Savings Plan

Substantially all of our domestic non-union employees are eligible to be enrolled in our company-sponsored contributory retirement savings plan, which include features under Section 401(k) of the Internal Revenue Code of 1986, as amended, and provide for matching and profit sharing contributions by us. Our contributions to the plans are determined by the Board of Directors subject to certain minimum requirements as specified in the plan.

The following table summarizes the total expense for employee retirement savings plans for fiscal 2010, 2009 and 2008:


	For the Fiscal Year Ended June 30,
(in millions)	2010		2009		2008
Employee retirement savings plans expense	$	84.3	$	72.4	$	64.2

18.

OFF-BALANCE SHEET ARRANGEMENTS

We periodically enter into certain off-balance sheet arrangements, primarily receivable sales and operating leases, in order to maximize diversification of funding and return on assets. The receivable sales, as described below, also provide for the transfer of credit risk to third parties.

Receivable-Related Arrangements

Cardinal Health Funding, LLC (“CHF”) was organized for the sole purpose of buying receivables and selling undivided interests in those receivables to multi-seller conduits administered by third party banks or other third party investors. CHF was designed to be a special purpose, bankruptcy-remote entity. Although consolidated in accordance with GAAP, CHF is a separate legal entity from Cardinal Health and from our subsidiary that sells and contributes the receivables to CHF. Through June 30, 2010, the sale of receivables by CHF qualified for sales treatment in accordance with the accounting guidance regarding financial asset transfers. As discussed in Note 1, the FASB issued new accounting guidance on the accounting for transfers of financial assets. As a result of this new guidance, we have determined that our committed receivables sales facility will not qualify as an off-balance sheet arrangement beginning in fiscal 2011.

At June 30, 2010 and 2009, we had a committed receivables sales facility program available through CHF with capacity to sell $950.0 million in receivables. Recourse is provided under the program by the requirement that CHF retain a subordinated interest in the sold receivables. We did not have any receivables outstanding under the committed receivables sales facility program at June 30, 2010 and 2009. During the second quarter of fiscal 2010, we amended our committed receivables sales facility program to extend it for an additional 364 days.

Cash Flows from all Receivable-Related Arrangements

Our net cash flow decrease related to receivable interest transfers for fiscal 2010, 2009 and 2008 were as follows:


(in millions)	2010			2009			2008
Cash collected in servicing of related receivable interests	$	0.0		$	0.0		$	0.3

Cash inflow to Cardinal Health	$	0.0		$	0.0		$	0.3
Cash collection remitted to the bank		(0.0	)		(2.8	)		(43.2	)

Net impact to Cardinal Health cash flows	$	(0.0	)	$	(2.8	)	$	(42.9	)

CHF was required to repurchase any receivables or interests sold if it was determined that the representations and warranties with regard to the related receivables were not accurate on the date sold, and with respect to the committed sales facility program, in the event that we failed to comply with the covenants in the Performance Guaranty or any other customary amortization event occurred. During fiscal 2010, we satisfied all of our outstanding obligations under these agreements.

Operating Leases

In a prior year, we entered into an operating lease agreement with a third party bank for the construction of various facilities and equipment. On June 26, 2009, we repurchased all remaining buildings, equipment and land which were previously under this operating lease agreement for $151.2 million. In addition, as part of the repurchase we recognized a $3.8 million impairment charge.

19.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is selected quarterly financial data for fiscal 2010 and 2009. The sum of the quarters may not equal year-to-date due to rounding.


(in millions, except per common share amounts)	First Quarter			Second Quarter		Third Quarter			Fourth Quarter (1)
Fiscal 2010
Revenue	$	24,780.7		$	24,919.7	$	24,342.8		$	24,459.6
Gross margin		908.8			957.7		1,010.1			904.1
Distribution, selling, general and administrative expenses		586.1			605.2		628.6			588.2
Earnings/(loss) from continuing operations		(61.8	)		230.2		224.8			193.8
Earnings/(loss) from discontinued operations		23.6			4.3		(2.4	)		29.7
Net earnings/(loss)		(38.2	)		234.5		222.4			223.5
Earnings/(loss) from continuing operations per Common Share:
Basic	$	(0.17	)	$	0.64	$	0.63		$	0.54
Diluted		(0.17	)		0.64		0.62			0.54

(1)

During the fourth quarter of fiscal 2010, we recorded an out-of-period increase in income tax expense of $14.7 million related to our state provision-to-return reconciliation (of which $5.1 million pertained to the first three quarters of fiscal 2010 and $9.6 million pertained to fiscal 2009). The amounts were not material individually or in the aggregate to current or prior periods.


(in millions, except per common share amounts)	First Quarter		Second Quarter		Third Quarter		Fourth Quarter (1)
Fiscal 2009
Revenue	$	23,437.1	$	24,117.8	$	24,089.3	$	24,347.3
Gross margin		901.2		915.1		986.9		944.3
Distribution, selling, general and administrative expenses		590.3		578.5		573.0		591.7
Earnings from continuing operations		172.2		169.0		215.1		202.0
Earnings from discontinued operations		76.9		147.5		97.8		71.2
Net earnings		249.1		316.5		312.9		273.2
Earnings from continuing operations per Common Share:
Basic	$	0.48	$	0.48	$	0.60	$	0.56
Diluted		0.48		0.47		0.60		0.56

(1)

During the fourth quarter of fiscal 2009, we recorded certain out of period items which increased gross margin by $5.2 million (of which $2.5 million pertained to the first three quarters of fiscal 2009 and $2.7 million pertained to fiscal 2008), increased distribution, selling, general and administrative expenses by $13.6 million (of which $4.2 million pertained to the first three quarters of fiscal 2009, $4.8 million pertained to fiscal 2008 and $4.6 million pertained to periods prior to fiscal 2008), and decreased earnings from continuing operations and net earnings by $4.5 million (of which $1.4 million pertained to fiscal 2008 and $3.1 million pertained to periods prior to fiscal 2008). The amounts were not material individually or in the aggregate to the current or prior periods.

20.

SUBSEQUENT EVENTS

On July 15, 2010, we completed the acquisition of Healthcare Solutions Holding, LLC for $517.0 million in cash. The agreement also includes potential maximum contingent payments of $150.0 million over the next three years.

Subsequent to fiscal 2010, we repurchased 7.5 million Common Shares having an aggregate cost of $250 million. The average price paid per common share for all Common Shares repurchased during July and August was $33.22.

Item 9:

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A:

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of June 30, 2010. Based on this evaluation, the principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of June 30, 2010 to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, controls deemed effective now may become inadequate in the future because of changes in conditions, or because compliance with the policies or procedures has deteriorated or been circumvented.

Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2010. In making this assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). Based on management’s assessment and the COSO criteria, management believes that our internal control over financial reporting was effective as of June 30, 2010 to provide reasonable assurance regarding the preparation and fair presentation of our published financial statements.

Our independent registered public accounting firm, Ernst & Young LLP, has issued a report on our internal control over financial reporting. Ernst & Young LLP’s report appears below under this Item 9A and expresses unqualified opinions on the effectiveness of our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the

Board of Directors of Cardinal Health, Inc.

We have audited Cardinal Health, Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of June 30, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management’s Report on Internal Control Over Financial Reporting.” Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2010, based on the COSO criteria .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Cardinal Health, Inc. and subsidiaries as of June 30, 2010 and 2009, and the related consolidated statements of earnings, shareholders’ equity, and cash flows for each of the three years in the period ended June 30, 2010 and our report dated August 26, 2010 expressed unqualified opinion thereon.

/s/ Ernst & Young LLP

Ernst & Young LLP

Columbus, Ohio

August 26, 2010

Item 9B:

Other Information

None.

PART III

Item 10:

Directors, Executive Officers and Corporate Governance

Certain of the information called for in this Item 10, including the information relating to directors, is incorporated herein by reference to our Definitive Proxy Statement (which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act) relating to 2010 Annual Meeting of Shareholders (the “2010 Annual Meeting”) under the captions “Proposal 1—Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Board of Directors and Committees of the Board—Committees of the Board of Directors,” “Corporate Governance—Director Qualification Standards and Performance Assessment” and “Corporate Governance—Policies on Business Ethics; Chief Legal and Compliance Officer.”

Information with respect to our executive officers appears in Part I of this report and is incorporated herein by reference.

Item 11:

Executive Compensation

The information called for by this Item 11 is incorporated herein by reference to our Definitive Proxy Statement (which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act) relating to the 2010 Annual Meeting under the captions “Compensation Discussion and Analysis,” “Executive Compensation,” “Director Compensation” and “Corporate Governance—Risk Oversight.” The information set forth under the subcaption “Human Resources and Compensation Committee Report” should not be deemed filed nor should it be incorporated by reference into any other filing under the Securities Act of 1933, as amended, or the Exchange Act except to the extent we specifically incorporate such report by reference therein.

Item 12:

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information relating to Security Ownership of Certain Beneficial Owners is incorporated herein by reference to our Definitive Proxy Statement (which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act) relating to the 2010 Annual Meeting under the caption “Security Ownership of Certain Beneficial Owners and Management.”

Equity Compensation Plan Information

Certain of our equity compensation plans are subject to shareholder approval and other plans have been authorized solely by the Board of Directors. The following is a description of plans that have not been approved by shareholders.

Broadly-based Equity Incentive Plan, as amended

The Cardinal Health, Inc. Broadly-based Equity Incentive Plan, as amended (the “BEIP”), was originally adopted by the Board effective November 15, 1999. The term of the BEIP expired on November 14, 2005, and no new awards are being granted under it. The BEIP provided for grants in the form of nonqualified stock options, restricted shares and RSUs to employees except for those employees who were subject to Section 16 of the Exchange Act. The aggregate number of Common Shares authorized for issuance under the BEIP was 36 million with no more than 10% of the authorized amount issuable in the form of restricted shares and RSUs having a restriction period of less than three years.

Amended and Restated Outside Directors Equity Incentive Plan, as amended

The Cardinal Health, Inc. Amended and Restated Outside Directors Equity Incentive Plan, as amended (the “ODEIP”), was originally adopted by the Board effective May 10, 2000. Our shareholders approved a new director equity plan at the 2007 Annual Meeting of Shareholders, the 2007 Nonemployee Directors Equity Incentive Plan, and no new awards may be granted under the ODEIP. The ODEIP provides for grants in the form of nonqualified stock options, restricted shares and RSUs to members of the Board who are not employees. The aggregate number of Common Shares authorized for issuance under the ODEIP was 1.5 million.

Global Employee Stock Purchase Plan, as amended and restated effective May 10, 2006

The Cardinal Health, Inc. Global Employee Stock Purchase Plan, as amended and restated effective May 10, 2006 (the “GESPP”), was originally adopted by the Board on February 9, 2000. The GESPP permits certain international employees to purchase Common Shares through payroll deductions. The total number of Common Shares made available for purchase under the GESPP is 4.5 million. International employees who have been employed by us for at least 30 days may be eligible to contribute from 1% to 15% of eligible compensation. The purchase price is determined by the lower of 85% of the closing market price on the first day of the offering period or 85% of the closing market price on the last day of the offering period. During any given calendar year, there are two offering periods: January 1—June 30; and July 1—December 31. In May 2009, the Compensation Committee approved an indefinite suspension of the GESPP beginning on July 1, 2009.

The following table summarizes information relating to our equity compensation plans at June 30, 2010:

Equity Compensation Plan Information


Plan Category	Number of Common Shares to be Issued Upon Exercise of Outstanding Options (In millions) (1)		Weighted-Average Exercise Price of Outstanding Options (1)			Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Common Shares Reflected in Column (a)) (In millions)
Equity compensation plans approved by shareholders	17.9	(2)	$	37.20	(2)	24.9	(3)
Equity compensation plans not approved by shareholders (4)	6.3	(5)	$	39.72	(5)	4.1	(6)
Total at June 30, 2010	24.2		$	37.87		29.0

(1)	The number of shares to be issued on exercise of outstanding options and weighted-average exercise price of outstanding options reflect adjustments to our outstanding awards made in connection with the Spin-Off, but do not include CareFusion equity awards issued in connection with the adjustments.

(2)

In addition to stock options outstanding under our Amended and Restated Equity Incentive Plan, as amended (the “EIP”), 2005 Long-Term Incentive Plan, as amended and restated effective as of November 5, 2008, as amended (the “LTIP”), and 2007 Non-Employee Directors Equity Incentive Plan, as amended (the “2007 Director EIP”), also includes 17,234, 540,667 and 58,660 RSUs outstanding under the EIP, LTIP and 2007 Directors EIP, respectively, that are payable solely in Common Shares. RSUs do not have an exercise price, and therefore were not included for purposes of computing the weighted-average exercise price.

(3)

Includes approximately 19.4 million Common Shares remaining available for future issuance under the LTIP in the form of options, stock appreciation rights, stock awards or other stock-based awards. Also includes approximately 4.6 million Common Shares remaining available for future issuance under the Employee Stock Purchase Plan, as amended and restated effective November 5, 2008 (the “ESPP”) and 907,948 Common Shares remaining available for future issuance under the 2007 Directors EIP. In May 2009, the Compensation Committee approved the indefinite suspension of the ESPP. In November 2009, the Compensation Committee approved adjustments to the share limits under the LTIP and 2007 Directors EIP in connection with the Spin-Off as permitted by the plans. The adjustments resulted in an increase in Common Shares remaining available for future issuance of approximately 7.2 million shares under the LTIP and approximately 0.2 million shares under the 2007 Directors EIP.

(4)	Does not include stock options to purchase 450,041 Common Shares at a weighted-average exercise price of $39.86 that we assumed in connection with acquisition transactions.

(5)

In addition to stock options outstanding under the BEIP and ODEIP, also includes 5,000 and 9,891 RSUs outstanding under the BEIP and ODEIP, respectively, that are payable solely in Common Shares. RSUs do not have an exercise price, and therefore were not included for purposes of computing the weighted-average exercise price.

(6)	Includes 4.1 million Common Shares remaining available for future issuance under the GESPP.

Item 13:

Certain Relationships and Related Transactions, and Director Independence

The information called for by this Item 13 is incorporated herein by reference to our Definitive Proxy Statement (which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act) relating to the 2010 Annual Meeting under the captions “Certain Relationships and Related Transactions” and “Corporate Governance—Director Independence.”

Item 14:

Principal Accounting Fees and Services

The information called for by this Item 14 is incorporated herein by reference to our Definitive Proxy Statement (which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act) relating to the 2010 Annual Meeting under the captions “Independent Accountants” and “Board of Directors and Committees of the Board—Committees of the Board of Directors.”

PART IV

Item 15:

Exhibits and Financial Statement Schedules

(a)(1) The following financial statements are included in Item 8 of this report:


		Page
Report of Independent Registered Public Accounting Firm		39
Financial Statements:
Consolidated Statements of Earnings for the Fiscal Years Ended June 30, 2010, 2009 and 2008		40
Consolidated Balance Sheets at June 30, 2010 and 2009		41
Consolidated Statements of Shareholders’ Equity for the Fiscal Years Ended June 30, 2010, 2009 and 2008		42
Consolidated Statements of Cash Flows for the Fiscal Years Ended June 30, 2010, 2009 and 2008		43
Notes to Consolidated Financial Statements		44

(a)(2) The following Supplemental Schedule is included in this report:


		Page
Schedule II—Valuation and Qualifying Accounts		99

All other schedules not listed above have been omitted as not applicable or because the required information is included in the Consolidated Financial Statements or in notes thereto.

(a)(3) Exhibits required by Item 601 of Regulation S-K:


Exhibit Number		Exhibit Description
3.1		Amended and Restated Articles of Incorporation of Cardinal Health, Inc., as amended (incorporated by reference to Exhibit 3.1 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-11373)

3.2		Cardinal Health, Inc. Restated Code of Regulations, as amended (incorporated by reference to Exhibit 3.2 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-11373)

4.1		Specimen Certificate for Common Shares of Cardinal Health, Inc. (incorporated by reference to Exhibit 4.01 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2001, File No. 1-11373)

4.2.1		Indenture, dated as of April 18, 1997, between Cardinal Health, Inc. and Bank One, Columbus, NA, Trustee (incorporated by reference to Exhibit 1 to Cardinal Health’s Current Report on Form 8-K filed on April 21, 1997, File No. 1-11373)

4.2.2		Supplemental Indenture, dated October 3, 2006, between Cardinal Health, Inc. and The Bank of New York Trust Company, N.A., (successor to J.P. Morgan Trust Company, National Association, successor to Bank One, N.A., formerly known as Bank One, Columbus, N.A.), as trustee (incorporated by reference to Exhibit 4.3 to Cardinal Health’s Current Report on Form 8-K filed on October 4, 2006, File No. 1-11373)

4.2.3		Second Supplemental Indenture, dated June 8, 2007, between Cardinal Health, Inc. and The Bank of New York Trust Company, N.A., (successor to J.P. Morgan Trust Company, National Association, successor to Bank One, N.A., formerly known as Bank One, Columbus, N.A.), as trustee (incorporated by reference to Exhibit 4.01 to Cardinal Health’s Current Report on Form 8-K filed on June 8, 2007, File No. 1-11373)

4.2.4		6.75% Notes due 2011 (incorporated by reference to Exhibit 4.2.6 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2008, File No. 1-11373)


4.2.5		4.00% Notes due 2015 (incorporated by reference to Exhibit 4.2.7 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2008, File No. 1-11373)

4.2.6		5.85% Notes due 2017 (incorporated by reference to Exhibit 4.2.8 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2008, File No. 1-11373)

4.2.7		5.80% Notes due 2016 (incorporated by reference to Exhibit 4.2.10 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2008, File No. 1-11373)

4.2.8		6.00% Notes due 2017 (incorporated by reference to Exhibit 4.2.11 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2008, File No. 1-11373)

4.2.9		5.65% Notes due 2012 (incorporated by reference to Exhibit 4.2.12 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2008, File No. 1-11373)

4.3.1		Indenture, dated as of June 2, 2008, between Cardinal Health, Inc. and The Bank of New York Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to Cardinal Health’s Current Report on Form 8-K filed on June 2, 2008, File No. 1-11373)

4.3.2		5.50% Notes due 2013 (incorporated by reference to Exhibit 4.2 to Cardinal Health’s Current Report on Form 8-K filed on June 2, 2008, File No. 1-11373)

4.4		Agreement to furnish to the Securities and Exchange Commission upon request a copy of instruments defining the rights of holders of certain long-term debt of Cardinal Health, Inc. and consolidated subsidiaries (incorporated by reference to Exhibit 4.07 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2005, File No. 1-11373)

10.1.1		Cardinal Health, Inc. 2005 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.01 to Cardinal Health’s Current Report on Form 8-K filed on November 7, 2005, File No. 1-11373)*

10.1.2		First Amendment to Cardinal Health, Inc. 2005 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.01 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, File No. 1-11373)*

10.1.3		Cardinal Health, Inc. 2005 Long-Term Incentive Plan (as amended and restated as of November 5, 2008) (incorporated by reference to Exhibit 10.1 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-11373)*

10.1.4		First Amendment to Cardinal Health, Inc. 2005 Long-Term Incentive Plan (as amended and restated as of November 5, 2008) (incorporated by reference to Exhibit 10.1.1 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)*

10.1.5		Second Amendment to Cardinal Health, Inc. 2005 Long-Term Incentive Plan (as amended and restated as of November 5, 2008) (incorporated by reference to Exhibit 10.1.2 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)*

10.1.6		Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (grants made to executive officers in August 2006) (incorporated by reference to Exhibit 10.03 to Cardinal Health’s Current Report on Form 8-K filed on August 7, 2006, File No. 1-11373)*

10.1.7		Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (grants made to executive officers in August and October 2007) (incorporated by reference to Exhibit 10.2 to Cardinal Health’s Current Report on Form 8-K filed on August 13, 2007, File No. 1-11373)*

10.1.8		Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (grants made to executive officers in February and August 2008) (incorporated by reference to Exhibit 10.1 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2007, File No. 1-11373)*


10.1.9		Form of Cardinal Health, Inc. Nonqualified Stock Option Agreement between Cardinal Health, Inc. (under the Cardinal Health, Inc. Stock Option Exchange Program) (grants made to executive officers in July 2009) (incorporated by reference to Exhibit 99(d)(2) to Cardinal Health’s Schedule TO-I filed on June 19, 2009)*

10.1.10		Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended and restated as of November 5, 2008 (grants made to executive officers in September 2009) (incorporated by reference to Exhibit 10.1.3 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)*

10.1.11		Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended and restated as of November 5, 2008, as amended (grants to be made to executive officers in August 2010 and thereafter)*

10.1.12		Form of Restricted Share Units Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (grants made to executive officers in August 2006) (incorporated by reference to Exhibit 10.04 to Cardinal Health’s Current Report on Form 8-K filed on August 7, 2006, File No. 1-11373)*

10.1.13		Form of Restricted Share Units Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (grants made to executive officers in August and October 2007) (incorporated by reference to Exhibit 10.3 to Cardinal Health’s Current Report on Form 8-K filed on August 13, 2007, File No. 1-11373)*

10.1.14		Form of Restricted Share Units Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (grants made to executive officers in February and August 2008) (incorporated by reference to Exhibit 10.2 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2007, File No. 1-11373)*

10.1.15		Form of Restricted Share Units Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended, for RSU grants to be made in connection with the Planned Spin-Off (grants made to executive officers in October 2008) (incorporated by reference to Exhibit 10.2 to Cardinal Health’s Current Report on Form 8-K filed on September 29, 2008, File No. 1-11373)*

10.1.16		Form of Restricted Share Units Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended and restated as of November 5, 2008 (grants made to executive officers in September 2009) (incorporated by reference to Exhibit 10.1.4 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)*

10.1.17		Form of Restricted Share Units Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended and restated as of November 5, 2008, as amended (grants to be made to executive officers in August 2010 and thereafter)*

10.1.18		Copy of resolutions adopted by the Human Resources and Compensation Committee of the Board of Directors on August 7, 2007 amending outstanding Nonqualified Stock Option, Restricted Share and Restricted Share Units Agreements under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (incorporated by reference to Exhibit 10.1.10 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007, File No. 1-11373)*

10.1.19		Copy of resolutions adopted by the Human Resources and Compensation Committee of the Board of Directors on November 6, 2007 amending outstanding Nonqualified Stock Option, Restricted Share and Restricted Share Units Agreements under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended, the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended, and the Cardinal Health, Inc. Broadly-based Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.3 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2007, File No. 1-11373)*


10.1.20		Copy of resolutions adopted by the Human Resources and Compensation Committee of the Board of Directors on September 26, 2008 amending outstanding Nonqualified Stock Option Agreements under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended, the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended, and the Cardinal Health, Inc. Broadly-based Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.2 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-11373)*

10.2.1		Cardinal Health, Inc. Equity Incentive Plan, as amended (incorporated by reference to Exhibit 99 to Cardinal Health’s Registration Statement on Form S-8 filed on November 16, 1995, No. 33-64337, Exhibit 10.03 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 1998, File No. 1-11373, Exhibit 10.01 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 1998, File No. 1-11373, and Exhibit 4(b) to Cardinal Health’s Registration Statement on Form S-8 filed on February 22, 1999, No. 333-72727)*

10.2.2		Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.02 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, File No. 1-11373)*

10.2.3		Copy of resolutions adopted by the Human Resources and Compensation Committee of the Board of Directors on May 7, 2002 amending the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended, and the Cardinal Health, Inc. Broadly-based Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.2.3 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007, File No. 1-11373)*

10.2.4		Third Amendment to the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.2.4 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007, File No. 1-11373)*

10.2.5		Fourth Amendment to Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.6 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2009, File No. 1-11373)*

10.2.6		Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended (grant made to executive officer in November 2001) (incorporated by reference to Exhibit 10.01 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001, File No. 1-11373)*

10.2.7		Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended (grants made to executive officers in November 2002 and November 2003) (incorporated by reference to Exhibit 10.01 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2003, File No. 1-11373)*

10.2.8		Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended (grants made to executive officers in August 2004) (incorporated by reference to Exhibit 10.04 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004, File No. 1-11373)*

10.2.9		Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended, for cliff vesting (grant made to executive officer in April 2005) (incorporated by reference to Exhibit 10.01 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 1-11373)*

10.2.10		Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended, for installment vesting (grants made to executive officers in April and September 2005) (incorporated by reference to Exhibit 10.03 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 1-11373)*

10.2.11		Form of Restricted Shares Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (grant made to executive officer in August 2007)*


10.2.12		Form of Restricted Shares Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (grant made to executive officer in August 2008)*

10.2.13		Form of Restricted Share Units Agreement under the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended, for cliff vesting (grant made in April 2005) (incorporated by reference to Exhibit 10.05 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 1-11373)*

10.2.14		Form of Restricted Share Units Agreement under the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended, for installment vesting (grants made to executive officers in April 2005) (incorporated by reference to Exhibit 10.06 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 1-11373)*

10.2.15		Copy of resolutions adopted by the Human Resources and Compensation Committee of the Board of Directors on August 7, 2007 amending outstanding Nonqualified Stock Option, Restricted Share and Restricted Share Units Agreements under the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended, and the Cardinal Health, Inc. Broadly-based Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.2.17 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007, File No. 1-11373)*

10.2.16		Form of Directors’ Stock Option Agreement under the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended (grants made in November 2000) (incorporated by reference to Exhibit 10.2.19 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007, File No. 1-11373)*

10.2.17		Form of Directors’ Stock Option Agreement under the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended (grants made in November 2001 and May and November 2002) (incorporated by reference to Exhibit 10.02 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001, File No. 1-11373)*

10.2.18		Form of Directors’ Stock Option Agreement under the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended (grants made in November 2003 and December 2004) (incorporated by reference to Exhibit 10.03 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2003, File No. 1-11373)*

10.2.19		Form of Directors’ Stock Option Agreement under the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended (grants made in November 2005) (incorporated by reference to Exhibit 10.07 to Cardinal Health’s Current Report on Form 8-K filed on November 7, 2005, File No. 1-11373)*

10.3.1		Cardinal Health, Inc. Outside Directors Equity Incentive Plan (incorporated by reference to Exhibit 4(b) to Cardinal Health’s Registration Statement on Form S-8 filed on May 31, 2000, No. 333-38192)*

10.3.2		Cardinal Health, Inc. Amended and Restated Outside Directors Equity Incentive Plan (incorporated by reference to Exhibit 10.23 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2005, File No. 1-11373)*

10.3.3		First Amendment to Cardinal Health, Inc. Amended and Restated Outside Directors Equity Incentive Plan (incorporated by reference to Exhibit 10.02 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, File No. 1-11373)*

10.3.4		Form of Directors’ Stock Option Agreement under the Cardinal Health, Inc. Outside Directors Equity Incentive Plan (grants made in November 2000) (incorporated by reference to Exhibit 10.3.4 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007, File No. 1-11373)*

10.3.5		Form of Directors’ Stock Option Agreement under the Cardinal Health, Inc. Outside Directors Equity Incentive Plan (grants made in November 2001 and May and November 2002) (incorporated by reference to Exhibit 10.03 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001, File No. 1-11373)*


10.3.6		Form of Directors’ Stock Option Agreement under the Cardinal Health, Inc. Outside Directors Equity Incentive Plan (grants made in November 2003 and December 2004) (incorporated by reference to Exhibit 10.04 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2003, File No. 1-11373)*

10.3.7		Form of Directors’ Stock Option Agreement under the Cardinal Health, Inc. Amended and Restated Outside Directors Equity Incentive Plan (grants made in November 2005 and December 2006) (incorporated by reference to Exhibit 10.08 to Cardinal Health’s Current Report on Form 8-K filed on November 7, 2005, File No. 1-11373)*

10.3.8		Form of Directors’ Stock Option Agreement under the Cardinal Health, Inc. Amended and Restated Outside Directors Equity Incentive Plan, as amended (grants made in November and December 2006 and August and November 2007) (incorporated by reference to Exhibit 10.03 to Cardinal Health’s Current Report on Form 8-K filed on November 13, 2006, File No. 1-11373)*

10.3.9		Form of Directors’ Restricted Share Units Agreement under the Cardinal Health, Inc. Amended and Restated Outside Directors Equity Incentive Plan (grants made in November 2005 and December 2006) (incorporated by reference to Exhibit 10.09 to Cardinal Health’s Current Report on Form 8-K filed on November 7, 2005, File No. 1-11373)*

10.3.10		Form of Directors’ Restricted Share Units Agreement under the Cardinal Health, Inc. Amended and Restated Outside Directors Equity Incentive Plan, as amended (grants made in November and December 2006 and August and November 2007) (incorporated by reference to Exhibit 10.04 to Cardinal Health’s Current Report on Form 8-K filed on November 13, 2006, File No. 1-11373)*

10.4.1		Cardinal Health, Inc. 2007 Nonemployee Directors Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2007, File No. 1-11373)*

10.4.2		First Amendment to Cardinal Health, Inc. 2007 Nonemployee Directors Equity Incentive Plan (incorporated by reference to Exhibit 10.2.1 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)*

10.4.3		Form of Directors’ Stock Option Agreement under the Cardinal Health, Inc. 2007 Nonemployee Directors Equity Incentive Plan (grants made in November 2008) (incorporated by reference to Exhibit 10.5 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2007, File No. 1-11373)*

10.4.4		Form of Directors’ Restricted Share Units Agreement under the Cardinal Health, Inc. 2007 Nonemployee Directors Equity Incentive Plan (grants made in November 2008) (incorporated by reference to Exhibit 10.5 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2008, File No. 1-11373)*

10.4.5		Form of Directors’ Restricted Share Units Agreement under the Cardinal Health, Inc. 2007 Nonemployee Directors Equity Incentive Plan (grants made in August, October, and December 2009, and January 2010) (incorporated by reference to Exhibit 10.2.2 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)*

10.5.1		Term Sheet for Adjustments to Cardinal Health Stock Options and Terms of CareFusion Stock Options (For current and former U.S. Cardinal Health employees) (incorporated by reference to Exhibit 10.2 to Cardinal Health’s Current Report on Form 8-K filed on September 1, 2009, File No. 1-11373)*

10.5.2		Term Sheet for Adjustments to Cardinal Health Restricted Share Units and Terms of CareFusion Restricted Share Units (For current and former U.S. Cardinal Health employees) (incorporated by reference to Exhibit 10.3 to Cardinal Health’s Current Report on Form 8-K filed on September 1, 2009, File No. 1-11373)*


10.5.3		Term Sheet for Adjustments to Cardinal Health Restricted Share Awards and Terms of CareFusion Restricted Share Awards (For current and former U.S. Cardinal Health employees)*

10.5.4		Term Sheet for Adjustments to Cardinal Health Stock Options and Terms of CareFusion Stock Options (For Directors)*

10.5.5		Term Sheet for Adjustments to Cardinal Health Restricted Share Units and Terms of CareFusion Restricted Share Units (For Directors)*

10.6.1		Cardinal Health, Inc. Broadly-based Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.52 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2002, File No. 1-11373)*

10.6.2		Second Amendment to the Cardinal Health, Inc. Broadly-based Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.4.2 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007, File No. 1-11373)*

10.6.3		Third Amendment to the Cardinal Health, Inc. Broadly-based Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.5 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2009, File No. 1-11373)*

10.7.1		Cardinal Health Deferred Compensation Plan, amended and restated effective January 1, 2005 (incorporated by reference to Exhibit 10.02 to Cardinal Health’s Current Report on Form 8-K filed on December 14, 2004, File No. 1-11373)*

10.7.2		Amendment to the Cardinal Health Deferred Compensation Plan, as amended and restated effective January 1, 2005 (incorporated by reference to Exhibit 10.01 to Cardinal Health’s Current Report on Form 8-K filed on December 22, 2005, File No. 1-11373)*

10.7.3		First Amendment to the Cardinal Health Deferred Compensation Plan, as amended and restated effective January 1, 2005 (incorporated by reference to Exhibit 10.03 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2006, File No. 1-11373)*

10.7.4		Second Amendment to the Cardinal Health Deferred Compensation Plan, as amended and restated effective January 1, 2005 (incorporated by reference to Exhibit 10.01 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, File No. 1-11373)*

10.7.5		Cardinal Health Deferred Compensation Plan, amended and restated effective January 1, 2009 (incorporated by reference to Exhibit 10.6.5 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2008, File No. 1-11373)*

10.7.6		First Amendment to Cardinal Health Deferred Compensation Plan, amended and restated effective January 1, 2009 (incorporated by reference to Exhibit 10.4 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-11373)*

10.7.7		Second Amendment to Cardinal Health Deferred Compensation Plan, as amended and restated effective January 1, 2009 (incorporated by reference to Exhibit 10.1 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, File No. 1-11373)*

10.8		Cardinal Health, Inc. Global Employee Stock Purchase Plan, as amended and restated effective as of May 10, 2006 (incorporated by reference to Exhibit 10.04 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2006, File No. 1-11373)*

10.9.1		Cardinal Health, Inc. Amended and Restated Management Incentive Plan (incorporated by reference to Exhibit 10.02 to Cardinal Health’s Current Report on Form 8-K filed on November 13, 2006, File No. 1-11373)*

10.9.2		First Amendment to the Cardinal Health, Inc. Amended and Restated Management Incentive (incorporated by reference to Exhibit 10.7.2 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007, File No. 1-11373)*


10.10		Cardinal Health, Inc. Long-Term Incentive Cash Program (incorporated by reference to Exhibit 10.1 to Cardinal Health’s Current Report on Form 8-K filed on August 13, 2007, File No. 1-11373)*

10.11		Cardinal Health, Inc. Policy Regarding Shareholder Approval of Severance Agreements (incorporated by reference to Exhibit 10.09 to Cardinal Health’s Current Report on Form 8-K filed on August 7, 2006, File No. 1-11373)*

10.12.1		Amended Employment Agreement dated, April 17, 2006, as amended on September 21, 2007, between Cardinal Health, Inc. and R. Kerry Clark (incorporated by reference to Exhibit 10.01 to Cardinal Health’s Current Report on Form 8-K filed on September 25, 2007, File No. 1-11373)*

10.12.2		Amendment, dated as of September 26, 2008, to Employment Agreement, dated as of April 17, 2006, as amended on September 21, 2007, by and between Cardinal Health, Inc. and R. Kerry Clark (incorporated by reference to Exhibit 10.1 to Cardinal Health’s Current Report on Form 8-K filed on September 29, 2008, File No. 1-11373)*

10.12.3		Second Amendment, dated as of August 4, 2009, to Employment Agreement, dated as of April 17, 2006, as amended on September 21, 2007, as amended on September 26, 2008, by and between Cardinal Health, Inc. and R. Kerry Clark (incorporated by reference to Exhibit 10.11.3 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2009, File No. 1-11373)*

10.12.4		Release Agreement effective as of September 1, 2009 by R. Kerry Clark for the benefit of Cardinal Health, Inc., and Release Agreement effective as of September 1, 2009 by Cardinal Health, Inc. for the benefit of R. Kerry Clark (incorporated by reference to Exhibit 10.3 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)*

10.12.5		Nonqualified Stock Option Agreement, dated April 17, 2006, between Cardinal Health, Inc. and R. Kerry Clark (incorporated by reference to Exhibit 10.04 to Cardinal Health’s Current Report on Form 8-K filed on April 19, 2006, File No. 1-11373)*

10.12.6		Restricted Share Units Agreement, dated April 17, 2006, between Cardinal Health, Inc. and R. Kerry Clark (incorporated by reference to Exhibit 10.05 to Cardinal Health’s Current Report on Form 8-K filed on April 19, 2006, File No. 1-11373)*

10.13		Employment Agreement, dated August 5, 2009, between Cardinal Health, Inc. and George S. Barrett (incorporated by reference to Exhibit 10.1 to Cardinal Health’s Current Report on Form 8-K filed on August 10, 2009, File No. 1-11373)*

10.14		Form of amended and restated Aircraft Time Sharing Agreement between Cardinal Health, Inc. and George S. Barrett (incorporated by reference to Exhibit 10.4.2 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)*

10.15		Confidentiality and Business Protection Agreement, effective as of February 15, 2010, between Cardinal Health, Inc. and Michael C. Kaufmann*

10.16		Confidentiality and Business Protection Agreement, effective as of September 29, 2008, between Cardinal Health, Inc. and Michael A. Lynch*

10.17		Nonqualified Stock Option Agreement, dated July 27, 2004, between Cardinal Health, Inc. and J. Michael Losh (incorporated by reference to Exhibit 10.71 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2006, File No. 1-11373)*

10.18		Form of Indemnification Agreement between Cardinal Health, Inc. and individual directors (incorporated by reference to Exhibit 10.38 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2004, File No. 1-11373)*

10.19		Form of Indemnification Agreement between Cardinal Health, Inc. and individual officers (incorporated by reference to Exhibit 10.39 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2004, File No. 1-11373)*


10.20.1		Description of outside director compensation effective November 7, 2007 (incorporated by reference to Exhibit 10.21.2 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007, File No. 1-11373)*

10.20.2		Description of Nonemployee Directors Compensation effective November 1, 2009 (incorporated by reference to Exhibit 10.23.2 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2009, File No. 1-11373)*

10.21.1		Issuing and Paying Agency Agreement, dated August 9, 2006, between Cardinal Health, Inc. and The Bank of New York (incorporated by reference to Exhibit 10.01 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2006, File No. 1-11373)

10.21.2		First Amendment to Issuing and Paying Agency Agreement, dated February 28, 2007, between Cardinal Health, Inc. and The Bank of New York (incorporated by reference to Exhibit 10.01 to Cardinal Health’s Current Report on Form 8-K filed on March 6, 2007, File No. 1-11373)

10.21.3		Commercial Paper Dealer Agreement, dated August 9, 2006, between Cardinal Health, Inc. and J.P. Morgan Securities Inc. (incorporated by reference to Exhibit 10.02 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2006, File No. 1-11373)

10.21.4		First Amendment to Commercial Paper Dealer Agreement, dated February 28, 2007, between Cardinal Health, Inc. and J.P. Morgan Securities Inc. (incorporated by reference to Exhibit 10.02 to Cardinal Health’s Current Report on Form 8-K filed on March 6, 2007, File No. 1-11373)

10.21.5		Commercial Paper Dealer Agreement, dated August 9, 2006, between Cardinal Health, Inc. and Banc of America Securities LLC (incorporated by reference to Exhibit 10.03 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2006, File No. 1-11373)

10.21.6		First Amendment to Commercial Paper Dealer Agreement, dated February 28, 2007, between Cardinal Health, Inc. and Banc of America Securities LLC (incorporated by reference to Exhibit 10.03 to Cardinal Health’s Current Report on Form 8-K filed on March 6, 2007, File No. 1-11373)

10.21.7		Commercial Paper Dealer Agreement, dated August 9, 2006, between Cardinal Health, Inc. and Wachovia Capital Markets, LLC (incorporated by reference to Exhibit 10.04 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2006, File No. 1-11373)

10.21.8		First Amendment to Commercial Paper Dealer Agreement, dated February 28, 2007, between Cardinal Health, Inc. and Wachovia Capital Markets, LLC (incorporated by reference to Exhibit 10.04 to Cardinal Health’s Current Report on Form 8-K filed on March 6, 2007, File No. 1-11373)

10.21.9		Commercial Paper Dealer Agreement, dated August 9, 2006, between Cardinal Health, Inc. and Goldman, Sachs & Co. (incorporated by reference to Exhibit 10.05 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2006, File No. 1-11373)

10.21.10		First Amendment to Commercial Paper Dealer Agreement, dated February 28, 2007, between Cardinal Health, Inc. and Goldman, Sachs & Co. (incorporated by reference to Exhibit 10.05 to Cardinal Health’s Current Report on Form 8-K filed on March 6, 2007, File No. 1-11373)

10.21.11		Form of Commercial Paper Dealer Agreement between Cardinal Health, Inc. and Sun Trust Robinson Humphrey, Inc. (incorporated by reference to Exhibit 10.2 to Cardinal Health’s Current Report on Form 8-K filed on April 21, 2009, File No. 1-11373)

10.22.1		Five-year Credit Agreement, dated as of January 24, 2007, between Cardinal Health, certain lenders, Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank N.A. and Barclays Bank PLC, as Syndication Agents, Morgan Stanley Bank and Deutsche Bank Securities Inc., as Documentation Agents, and Banc of America Securities LLC, J.P. Morgan Securities, Inc. and Barclays Capital, as Joint Lead Arrangers and Book Managers (incorporated by reference to Exhibit 10.01 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2006, File No. 1-11373)


10.22.2		Amendment No. 1 to Credit Agreement and Limited Consent, dated as of April 16, 2009, between Cardinal Health, Inc., Bank of America, N.A., in its capacity as administrative agent for the lenders, and certain lenders (incorporated by reference to Exhibit 10.1 to Cardinal Health’s Current Report on Form 8-K filed on April 21, 2009, File No. 1-11373)

10.23.1		Third Amended and Restated Receivables Purchase Agreement, dated as of November 19, 2007, among Cardinal Health Funding, LLC, Griffin Capital, LLC, each entity signatory thereto as a Conduit, each entity signatory thereto as a Financial Institution, each entity signatory thereto as a Managing Agent and Wachovia Capital Markets, LLC, as the Agent (incorporated by reference to Exhibit 10.1 to Cardinal Health’s Current Report on Form 8-K filed on November 26, 2007, File No. 1-11373)

10.23.2		First Amendment, dated as of November 13, 2008, to the Third Amended and Restated Receivables Purchase Agreement, dated as of November 19, 2007, among Cardinal Health Funding, LLC, Griffin Capital, LLC, each entity signatory thereto as a Conduit, each entity signatory thereto as a Financial Institution, each entity signatory thereto as a Managing Agent and Wachovia Capital Markets, LLC, as the Agent (incorporated by reference to Exhibit 10.1 to Cardinal Health’s Current Report on Form 8-K filed on November 18, 2008, File No. 1-11373)

10.23.3		Second Amendment and Joinder to the Third Amended and Restated Receivables Purchase Agreement and Amendment to the Performance Guaranty, dated as of May 1, 2009 (incorporated by reference to Exhibit 10.1 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, File No. 1-11373)

10.23.4		Third Amendment, dated as of November 10, 2009, to the Third Amended and Restated Receivables Purchase Agreement, dated as of November 19, 2007 (incorporated by reference to exhibit 10.1 to Cardinal Health’s Current Report on Form 8-K filed on November 16, 2009, File No. 1-11373)

10.23.5		Fourth Amendment, dated as of March 25, 2010, to the Third Amended and Restated Receivables Purchase Agreement and Waiver, dated as of November 19, 2007 (incorporated by reference to Exhibit 10.2 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, File No. 1-11373)

10.23.6		Second Amended and Restated Performance Guaranty, dated as of June 20, 2007, executed by Cardinal Health, Inc. in favor of Cardinal Health Funding, LLC (incorporated by reference to Exhibit 10.25.3 to Cardinal Health’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007, File No. 1-11373)

10.23.7		Third Amended and Restated Performance Guaranty, dated as of March 25, 2010, executed by Cardinal Health, Inc. in favor of Cardinal Health Funding, LLC (incorporated by reference to Exhibit 10.3 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, File No. 1-11373)

10.23.8		Omnibus Amendment and Waiver, dated as of December 15, 2009, to the Third Amended and Restated Receivables Purchase Agreement and Waiver, dated as of November 19, 2007

10.24.1		Employee Matters Agreement, dated as of August 31, 2009, by and between Cardinal Health, Inc. and CareFusion Corporation (incorporated by reference to Exhibit 10.1 to Cardinal Health’s Current Report on Form 8-K filed on September 4, 2009, File No. 1-11373)

10.24.2		Transition Services Agreement, dated as of August 31, 2009, between Cardinal Health, Inc. and CareFusion Corporation (incorporated by reference to Exhibit 10.2 to Cardinal Health’s Current Report on Form 8-K filed on September 4, 2009, File No. 1-11373)

10.24.3		Tax Matters Agreement, dated as of August 31, 2009, by and between Cardinal Health, Inc. and CareFusion Corporation (incorporated by reference to Exhibit 10.3 to Cardinal Health’s Current Report on Form 8-K filed on September 4, 2009, File No. 1-11373)


10.24.4		Stockholder’s and Registration Rights Agreement, dated as of August 31, 2009, by and between Cardinal Health, Inc. and CareFusion Corporation (incorporated by reference to Exhibit 10.4 to Cardinal Health’s Current Report on Form 8-K filed on September 4, 2009, File No. 1-11373)

10.24.5		Separation Agreement, dated July 22, 2009, by and between Cardinal Health, Inc. and CareFusion Corporation (incorporated by reference to Exhibit 2.1 to Cardinal Health’s Current Report on Form 8-K filed on July 22, 2009, File No. 1-11373)

10.24.6		Purchase Agreement, dated July 14, 2009, among CareFusion Corporation, Deutsche Bank Securities Inc., Goldman, Sachs & Co. and UBS Securities LLC (incorporated by reference to Exhibit 10.1 to Cardinal Health’s Current Report on Form 8-K filed on July 22, 2009, File No. 1-11373)

10.24.7		Three Year Credit Agreement, dated as of July 1, 2009, among CareFusion Corporation, the guarantors named therein, Bank of America, N.A., as administrative agent, swing line lender and L/C Issuer, JPMorgan Chase Bank, N.A. and Morgan Stanley Senior Funding, Inc., as syndication agents, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to Cardinal Health’s Current Report on Form 8-K filed on July 6, 2009, File No. 1-11373)

10.24.8		364-Day Credit Agreement, dated as of July 1, 2009, among CareFusion Corporation, the guarantors named therein, Bank of America, N.A., as administrative agent, swing line lender and L/C Issuer, JPMorgan Chase Bank, N.A. and Morgan Stanley Senior Funding, Inc., as syndication agents, and the other lenders party thereto (incorporated by reference to Exhibit 10.2 to Cardinal Health’s Current Report on Form 8-K filed on July 6, 2009, File No. 1-11373)

10.24.9		Bridge Credit Agreement, dated as of July 1, 2009, among CareFusion Corporation, the guarantors named therein, Bank of America, N.A., as administrative agent, and Banc of America Securities LLC, J.P. Morgan Securities Inc. and Morgan Stanley Senior Funding, Inc. as joint lead arrangers and joint book managers, and the other lenders party thereto (incorporated by reference to Exhibit 10.3 to Cardinal Health’s Current Report on Form 8-K filed on July 6, 2009, File No. 1-11373)

10.24.10		CareFusion Corporation 2009 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 to CareFusion’s Registration Statement on Form S-8 (File No. 333-161615) filed with the Securities and Exchange Commission on August 28, 2009)

12.1		Computation of Ratio of Earnings to Fixed Charges

21.1		List of Subsidiaries of Cardinal Health, Inc.

23.1		Consent of Independent Registered Public Accounting Firm

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.1		Statement Regarding Forward-Looking Information

101.INS**		XBRL Instance Document

101.SCH**		XBRL Taxonomy Extension Schema Document

101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document


101.DEF**		XBRL Taxonomy Definition Linkbase Document

101.LAB**		XBRL Taxonomy Extension Label Linkbase Document

101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document

*	Management contract or compensation plan or arrangement.

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. This information will be filed by amendment within 30 days under Rule 405 of Regulation S-T.

Cardinal Health Website

Cardinal Health uses its website as a channel of distribution for material information about us. Important information, including news releases, earnings and analyst presentations and financial information regarding Cardinal Health is routinely posted and accessible on the Investors page at www.cardinalhealth.com. In addition, Cardinal Health’s website allows investors and other interested persons to sign up to automatically receive email alerts when we post news releases, SEC filings and certain other information on our website.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 26, 2010.


CARDINAL HEALTH, INC.

By:		/s/ G EORGE S. B ARRETT
		George S. Barrett
		Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated on August 26, 2010.


Name		Title

/s/ G EORGE S. B ARRETT George S. Barrett		Chairman and Chief Executive Officer and Director (principal executive officer)

/s/ J EFFREY W. H ENDERSON Jeffrey W. Henderson		Chief Financial Officer (principal financial officer)

/s/ S TUART G. L AWS Stuart G. Laws		Senior Vice President and Chief Accounting Officer (principal accounting officer)

/s/ C OLLEEN F. A RNOLD Colleen F. Arnold		Director

/s/ G LENN A. B RITT Glenn A. Britt		Director

/s/ C ARRIE S. C OX Carrie S. Cox		Director

/s/ C ALVIN D ARDEN Calvin Darden		Director

/s/ B RUCE L. D OWNEY Bruce L. Downey		Director

/s/ J OHN F. F INN John F. Finn		Director

/s/ G REGORY B. K ENNY Gregory B. Kenny		Director

/s/ J AMES J. M ONGAN , M.D. James J. Mongan, M.D.		Director

/s/ R ICHARD C. N OTEBAERT Richard C. Notebaert		Director

/s/ D AVID W. R AISBECK David W. Raisbeck		Director

/s/ J EAN G. S PAULDING , M.D. Jean G. Spaulding, M.D.		Director

CARDINAL HEALTH, INC. AND SUBSIDIARIES

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS (3)


Description	Balance at Beginning of Period		Charged to Costs and Expenses			Charged to Other Accounts (1)		Deductions (2)			Balance at End of Period
	(In millions)
Fiscal Year 2010:
Accounts receivable	$	111.8	$	26.8		$	4.1	$	(11.3	)	$	131.4
Finance notes receivable		5.2		0.2			0.1		2.8			8.3
Net investment in sales-type leases		0.6		(0.2	)		0.0		0.0			0.4

	$	117.6	$	26.8		$	4.2	$	(8.5	)	$	140.1

Fiscal Year 2009:
Accounts receivable	$	109.1	$	50.7		$	0.2	$	(48.2	)	$	111.8
Finance notes receivable		4.2		0.6			0.4		0.0			5.2
Net investment in sales-type leases		0.6		0.1			0.0		(0.1	)		0.6

	$	113.9	$	51.4		$	0.6	$	(48.3	)	$	117.6

Fiscal Year 2008:
Accounts receivable	$	105.5	$	20.1		$	3.0	$	(19.5	)	$	109.1
Finance notes receivable		4.2		(0.1	)		0.0		0.1			4.2
Net investment in sales-type leases		0.7		(0.1	)		0.0		0.0			0.6

	$	110.4	$	19.9		$	3.0	$	(19.4	)	$	113.9

(1)	During fiscal 2010, 2009 and 2008 recoveries of amounts provided for or written off in prior years were $1.0 million, $0.5 million and $3.1 million, respectively.

(2)	Write-off of uncollectible accounts.

(3)	Amounts included herein pertain to the continuing operations of Cardinal Health.

Exhibit 10.1.11

CARDINAL HEALTH, INC.

NONQUALIFIED STOCK OPTION AGREEMENT

This Nonqualified Stock Option Agreement (this “Agreement”) is entered into in Franklin County, Ohio. On [date of grant] (the “Grant Date”), Cardinal Health, Inc., an Ohio corporation (the “Company”), has awarded to [employee name] (“Awardee”), an option (the “Option”) to purchase [# of shares] common shares, without par value, of the Company (the “Shares”) for a price of [$X.XX] per share. The Option has been granted under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan (As Amended and Restated as of November 5, 2008), as amended (the “Plan”), and will include and be subject to all provisions of the Plan, which are incorporated herein by reference, and will be subject to the provisions of this Agreement. Capitalized terms used in this agreement which are not specifically defined will have the meanings ascribed to such terms in the Plan. [CLIFF ALTERNATIVE: This Option shall vest and become exercisable on the [ ] anniversary of the Grant Date (the “Vesting Date”), subject to the provisions of this Agreement, including those relating to Awardee’s continued employment with the Company and its Affiliates (collectively, the “Cardinal Group”).] [INSTALLMENT ALTERNATIVE: This Option shall vest and become exercisable in [ ] installments, which shall be as nearly equal as possible, on the first [ ] anniversaries of the Grant Date (each a “Vesting Date” with respect to the portion of the Option scheduled to vest on such date), subject in each case to the provisions of this Agreement, including those relating to Awardee’s continued employment with the Company and its Affiliates (collectively, the “Cardinal Group”).] Notwithstanding the foregoing, in the event of a Change of Control prior to Awardee’s Termination of Employment, the Option shall vest in full. This Option shall expire on [date of expiration] (the “Grant Expiration Date”).

1. Method of Exercise and Payment of Price .

(a) Method of Exercise . At any time when all or a portion of the Option is exercisable under the Plan and this Agreement, some or all of the exercisable portion of the Option may be exercised from time to time by written notice to the Company, or such other method of exercise as may be specified by the Company, including without limitation, exercise by electronic means on the web site of the Company’s third-party equity plan administrator, which will:

(i) state the number of whole Shares with respect to which the Option is being exercised; and

(ii) if the Option is being exercised by anyone other than Awardee, if not already provided, be accompanied by proof satisfactory to counsel for the Company of the right of such person or persons to exercise the Option under the Plan and all applicable laws and regulations.

(b) Payment of Price . The full exercise price for the portion of the Option being exercised shall be paid to the Company as provided below:

(i) in cash;

(ii) by check acceptable to the Company or wire transfer (denominated in U.S. Dollars);

(iii) subject to any conditions or limitations established by the Administrator, other Shares owned by Awardee that have a Fair Market Value on the date of surrender equal to or greater than the aggregate exercise price of the Shares as to which said Option shall be exercised (it being agreed that the excess of the Fair Market Value over the aggregate exercise price shall be refunded to Awardee, with any fractional Share being repaid in cash);

(iv) if permitted by the Administrator, consideration received by the Company under a broker-assisted sale and remittance program acceptable to the Administrator;

(v) if permitted by the Administrator, and subject to any conditions or limitations established by the Administrator, the Company’s withholding Shares otherwise issuable upon exercise of the Option; or

(vi) any combination of the foregoing methods of payment.

2. Transferability . The Option shall be transferable (I) at Awardee’s death, by Awardee by will or pursuant to the laws of descent and distribution, and (II) by Awardee during Awardee’s lifetime, without payment of consideration, to (a) the spouse, former spouse, parents, stepparents, grandparents, parents-in-law, siblings, siblings-in-law, children, stepchildren, children-in-law, grandchildren, nieces or nephews of Awardee, or any other persons sharing Awardee’s household (other than tenants or employees) (collectively, “Family Members”), (b) a trust or trusts for the primary benefit of Awardee or such Family Members, (c) a foundation in which Awardee or such Family Members control the management of assets, or (d) a partnership in which Awardee or such Family Members are the majority or controlling partners; provided, however, that subsequent transfers of the transferred Option shall be prohibited, except (X) if the transferee is an individual, at the transferee’s death by the transferee by will or pursuant to the laws of descent and distribution, and (Y) without payment of consideration to the individuals or entities listed in subparagraphs II(a), (b) or (c), above, with respect to the original Awardee. The Administrator may, in its discretion, permit transfers to other persons and entities as permitted by the Plan. Neither a transfer under a domestic relations order in settlement of marital property rights nor a transfer to an entity in which more than 50% of the voting interests are owned by Awardee or Family Members in exchange for an interest in that entity shall be considered to be a transfer for consideration. Within 10 days of any transfer, Awardee shall notify the Compensation and Benefits department of the Company in writing of the transfer. Following transfer, the Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer and, except as otherwise provided in the Plan or this Agreement, references to the original Awardee shall be deemed to refer to the transferee. The events of a Termination of Employment of Awardee provided in paragraph 3 hereof shall continue to be applied with respect to the original Awardee, following which the Option shall be exercisable by the transferee only to the extent, and for the periods, specified in paragraph 3. The Company shall have no obligation to notify any transferee of Awardee’s Termination of Employment with the Cardinal Group for any reason. The conduct prohibited of Awardee in paragraph 5 hereof shall continue to be prohibited of Awardee following transfer to the same extent as immediately prior to transfer and the Option (or its economic value, as applicable) shall be subject to forfeiture by the transferee and recoupment from Awardee to the same extent as would have been the case of Awardee had the Option not been transferred. Awardee shall remain subject to the recoupment provisions of paragraph 5 of this Agreement and tax withholding provisions of Section 31 of the Plan following transfer of the Option.

3. Termination of Employment .

(a) Termination of Employment by Reason of Death or Disability . If a Termination of Employment occurs by reason of death or Disability prior to the vesting in full of the Option, but at least six (6) months from the Grant Date, then any unvested portion of the Option shall vest upon and become exercisable in full from and after such death or Disability. The Option may thereafter be exercised by the Awardee, any transferee of Awardee, if applicable, or by the legal representative of the estate or by the legatee of Awardee under the will of Awardee from the date of such death or Disability until the Grant Expiration Date.

(b) Termination of Employment by Reason of Retirement . If a Termination of Employment occurs by reason of Retirement prior to the vesting in full of the Option, but at least six (6) months from the Grant Date, then a Ratable Portion of each installment of the Option that would have vested on each future Vesting Date shall immediately vest and become exercisable. Such Ratable Portion shall, with respect to the applicable installment, be an amount equal to such installment of the Option scheduled to vest on the applicable Vesting Date multiplied by a fraction, the numerator of which shall be the number of days from the Grant Date through the date of such termination, and the denominator of which shall be the number of days from the Grant Date through such Vesting Date. The Option, to the extent vested, may be exercised by Awardee (or any transferee, if applicable) until the Grant Expiration Date. If Awardee dies after Retirement, but before the Grant Expiration Date, the Option, to the extent vested, may be exercised by any transferee of the Option, if applicable, or by the legal representative of the estate or by the legatee of Awardee under the will of Awardee from and after such death until the Grant Expiration Date. For purposes of this Agreement and this Award under the Plan, “Retirement” shall refer to Age 55 Retirement, which means Termination of Employment by a Participant (other than by reason of death or Disability and other than in the event of Termination for Cause) from the Company and its Affiliates (a) after attaining age fifty-five (55), and (b) having at least ten (10) years of continuous service with the Company and its Affiliates, including service with an Affiliate of the Company prior to the time that such Affiliate became an Affiliate of the Company. For purposes of the age and/or service requirement, the Administrator may, in its discretion, credit a Participant with additional age and/or years of service.

(c) Other Termination of Employment . If a Termination of Employment occurs by any reason other than death, Retirement or Disability (each at least six (6) months from Grant Date), any unexercised portion of the Option which has not vested on such date of Termination of Employment will automatically be forfeited. Subject to Section 16(b)(ii) of the Plan and subparagraphs 3(a) and (b) above, Awardee (or any transferee, if applicable) will have 90 days from the date of Termination of Employment or until the Grant Expiration Date, whichever period is shorter, to exercise any portion of the Option that is vested and exercisable on the date of Termination of Employment; provided, however, that if the Termination of Employment was a Termination for Cause, as determined by the Administrator, the Option may be immediately canceled by the Administrator (whether then held by Awardee or any transferee).

4. Restrictions on Exercise . The Option is subject to all restrictions in this Agreement and/or in the Plan. As a condition of any exercise of the Option, the Company may require Awardee or his or her transferee or successor to make any representation and warranty to comply with any applicable law or regulation or to confirm any factual matters (including Awardee’s compliance with the terms of paragraph 5 of this Agreement or any employment or severance agreement between the Cardinal Group and Awardee) reasonably requested by the Company. The Option shall not be exercisable if such exercise would involve a violation of any Applicable Law.

5. Special Forfeiture and Repayment Rules . This Agreement contains special forfeiture and repayment rules intended to encourage conduct that protects the Cardinal Group’s legitimate business assets and discourage conduct that threatens or harms those assets. The Company does not intend to have the benefits of this Agreement reward or subsidize conduct detrimental to the Company, and therefore will require the forfeiture of the benefits offered under this Agreement and the repayment of gains obtained from this Agreement, according to the rules specified below. Activities that trigger the forfeiture and repayment rules are divided into two categories: Misconduct and Competitor Conduct.

(a) Misconduct . During employment with the Cardinal Group and for three years after the Termination of Employment for any reason, Awardee agrees not to engage in Misconduct. If Awardee engages in Misconduct during employment or within three years after the Termination of Employment for any reason, then

(i) Awardee immediately forfeits the Option (or any part thereof that has not been exercised) which shall automatically terminate, and

(ii) Awardee shall, within 30 days following written notice from the Company, pay the Company an amount equal to (A) the gross gain to Awardee or any transferee from each and every exercise of the Option at any time within three years prior to the date the Misconduct first occurred (as determined by the Administrator) less (B) $1.00. The gross gain shall be calculated by subtracting the exercise price paid for the Shares from the market value of the Shares on the exercise date.

As used in this Agreement, “ Misconduct ” means

(A) disclosing or using any of the Cardinal Group’s confidential information (as defined by the applicable Cardinal Group policies and agreements) without proper authorization from the Cardinal Group or in any capacity other than as necessary for the performance of the Awardee’s assigned duties for the Cardinal Group;

(B) violation of applicable Cardinal Group policies, including but not limited to conduct which would constitute a breach of any representation or certificate of compliance signed by Awardee;

(C) fraud, gross negligence or willful misconduct by Awardee, including but not limited to fraud, gross negligence or willful misconduct causing or contributing to a material error resulting in a restatement of the financial statements of any member of the Cardinal Group;

(D) directly or indirectly soliciting or recruiting for employment or contract work on behalf of a person or entity other than a member of the Cardinal Group, any person who is an employee, representative, officer or director in the Cardinal Group or who held one or more of those positions at any time within the 12 months prior to Awardee’s Termination of Employment;

(E) directly or indirectly inducing, encouraging or causing an employee of the Cardinal Group to terminate his/her employment or a contract worker to terminate his/her contract with a member of the Cardinal Group;

(F) any action by Awardee and/or his or her representatives that either does or could reasonably be expected to undermine, diminish or otherwise damage the relationship between the Cardinal Group and any of its customers, prospective customers, vendors, suppliers and/or employees known to Awardee; and

(G) breaching any provision of any employment or severance agreement with a member of the Cardinal Group.

(b) Competitor Conduct . If Awardee chooses to engage in Competitor Conduct during employment or within one year after the Termination of Employment for any reason, then

(i) Awardee immediately forfeits the Option (or any part thereof that has not been exercised) which shall automatically terminate, and

(ii) Awardee shall, within 30 days following written notice from the Company, pay the Company an amount equal to (A) the gross gain to Awardee or any transferee from each and every exercise of the Option at any time since the earlier of one year prior to the date the Competitor Conduct first occurred (as determined by the Administrator) and one year prior to the Termination of Employment, if applicable, less (B) $1.00. The gross gain shall be calculated by subtracting the exercise price paid for the Shares from the market value of the Shares on the exercise date.

As used in this Agreement, “ Competitor Conduct ” means accepting employment with, or directly or indirectly providing services to, a Competitor in the United States. If the Awardee has a Termination of Employment and Awardee’s responsibilities to the Cardinal Group were limited to a specific territory or territories within or outside the United States during the 24 months prior to the Termination of Employment, then Competitor Conduct shall be limited to that specific territory or territories. A “Competitor” shall mean any person or business that competes with the products or services provided by a member of the Cardinal Group for which Awardee had business responsibilities within 24 months prior to Termination of Employment or about which Awardee obtained confidential information (as defined by the applicable Cardinal Group policies or agreements).

(i) Nothing in this paragraph 5 shall constitute or be construed as a “noncompete” covenant or other restraint on employment or trade. The provisions of this paragraph do not prevent, nor are they intended to prevent, Awardee from seeking or accepting employment or other work outside the Cardinal Group. The execution of this Agreement is voluntary. Awardee is free to choose to comply with the terms of this Agreement and receive the benefits offered or else reject this Agreement with no adverse consequences to Awardee’s employment with the Cardinal Group.

(ii) Awardee agrees to provide the Company with at least 10 days written notice prior to accepting employment with or providing services to a Competitor prior to one year after Termination of Employment.

(iii) Awardee acknowledges receiving sufficient consideration for the requirements of this paragraph 5, including Awardee’s receipt of the Option. Awardee further acknowledges that the Company would not provide the Option to Awardee without Awardee’s promise to abide by the terms of this paragraph 5. The parties also acknowledge that the provisions contained in this paragraph 5 are ancillary to, or part of, an otherwise enforceable agreement at the time this Agreement is made.

(iv) Awardee may be released from the obligations of this paragraph 5 if and only if the Administrator determines, in writing and in the Administrator’s sole discretion, that a release is in the best interests of the Company.

6. Right of Set-Off . By accepting this Option, Awardee consents to a deduction from, and set-off against, any amounts owed to Awardee that are not treated as “non-qualified deferred compensation” under Section 409A of the U.S. Internal Revenue Code of 1986, as amended, by any member of the Cardinal Group from time to time (including, but not limited to, amounts owed to Awardee as wages, severance payments or other fringe benefits) to the extent of the amounts owed to the Cardinal Group by Awardee under this Agreement.

7. Withholding Tax .

(a) Generally . Awardee is liable and responsible for all taxes owed in connection with the exercise of the Option, regardless of any action the Company takes with respect to any tax withholding obligations that arise in connection with the Option. The Company does not make any representation or undertaking regarding the tax treatment or the treatment of any tax withholding in connection with the exercise of the Option. The Company does not commit and is under no obligation to structure the Option or the exercise of the Option to reduce or eliminate Awardee’s tax liability.

(b) Payment of Withholding Taxes . Concurrently with the payment of the exercise price pursuant to paragraph 1 hereof, Awardee is required to arrange for the satisfaction of the minimum amount of any domestic or foreign tax withholding obligation, whether national, federal, state or local, including any employment tax obligation (the “Tax Withholding Obligation”) in a manner acceptable to the Company. Any manner provided for in subparagraph 1(b) hereof shall be deemed an acceptable manner to satisfy the Tax Withholding Obligation unless otherwise determined by the Company.

8. Holding Period Requirement . If Awardee is classified as an “officer” of the Company within the meaning of Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended, on the Grant Date, then, as a condition to receipt of the Option, Awardee hereby agrees to hold Shares purchased pursuant to each exercise of all or a portion of this Option, with a Fair Market Value at the time of such exercise equal to the After-Tax Net Profit, until the first anniversary of such exercise (or, if earlier, the date of Awardee’s Termination of Employment). “After-Tax Net Profit” means the total Fair Market Value at the time of exercise of Shares as to which this Option is exercised, minus the sum of (i) the aggregate exercise price to purchase such Shares, and (ii) the amount of all applicable federal, state, local or foreign income, employment or other tax and other similar fees that are withheld in connection with such exercise.

be bound by the decisions of the Administrator with regard to the interpretation of this Agreement and with regard to any and all matters set forth in this Agreement. In fulfilling his or her responsibilities, the Administrator may rely upon documents, written statements of the parties or other material as the Administrator deems appropriate. The parties agree that there is no right to be heard or to appear before the Administrator and that any decision of the Administrator relating to this Agreement, including without limitation whether particular conduct constitutes Misconduct or Competitor Conduct, shall be final and binding. The Administrator may delegate its functions under this Agreement to an officer of the Cardinal Group designated by the Administrator.

11. Prompt Acceptance of Agreement . The Option grant evidenced by this Agreement shall, at the discretion of the Administrator, be forfeited if this Agreement is not manually executed and returned to the Company, or electronically executed by Awardee by indicating Awardee’s acceptance of this Agreement in accordance with the acceptance procedures set forth on the Company’s third-party equity plan administrator’s web site, within 90 days of the Grant Date.

12. Electronic Delivery and Consent to Electronic Participation . The Company may, in its sole discretion, decide to deliver any documents related to the Option grant under and participation in the Plan or future options that may be granted under the Plan by electronic means. Awardee hereby consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company, including the acceptance of option grants and the execution of option agreements through electronic signature.

13. Notices . All notices, requests, consents and other communications required or provided under this Agreement to be delivered by Awardee to the Company will be in writing and will be deemed sufficient if delivered by hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to the Company at the address set forth below:

Cardinal Health, Inc.

7000 Cardinal Place

Dublin, Ohio 43017

Attention: General Counsel

Facsimile: (614) 757-5051

All notices, requests, consents and other communications required or provided under this Agreement to be delivered by the Company to Awardee may be delivered by e-mail or in writing and will be deemed sufficient if delivered by e-mail, hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to Awardee.

15. Employment Agreement, Offer Letter or Other Arrangement . To the extent a written employment agreement, offer letter or other arrangement (“Employment Arrangement”) that was approved by the Human Resources and Compensation Committee or the Board of Directors or that was approved in writing by an officer of the Company pursuant to delegated authority of the Human Resources and Compensation Committee provides for greater benefits to Awardee with respect to (i) vesting of the Option on Termination of Employment by reason of specified events or (ii) exercisability of the Option following Termination of Employment, than provided in this Agreement or in the Plan, then the terms of such Employment Arrangement with respect to vesting of the Option on Termination of Employment by reason of such specified events or exercisability of the Option following Termination of Employment shall supersede the terms hereof to the extent permitted by the terms of the Plan.

16. Amendments. Any amendment to the Plan will be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall impair the rights of Awardee with respect to an outstanding Award, unless mutually agreed otherwise between Awardee and the Administrator, which agreement must be in writing and signed by Awardee and the Company, except that no such agreement shall be required if the Administrator determines in its sole discretion that such amendment either (a) is required or advisable in order for the Company, the Plan or the Option to satisfy any Applicable Law or to meet the requirements of any accounting standard, or (b) is not reasonably likely to significantly diminish the benefits provided under the Option, or that any such diminishment has been adequately compensated, except following a Change of Control affect the rights of Awardee with respect to the Option without Awardee’s consent.


CARDINAL HEALTH, INC.

By:

Its:

ACCEPTANCE OF AGREEMENT

Awardee hereby: (a) acknowledges receiving a copy of the Plan, which has either been previously delivered or is provided with this Agreement, and represents that he or she is familiar with and understands all provisions of the Plan and this Agreement; (b) voluntarily and knowingly accepts this Agreement and the Option granted to him or her under this Agreement subject to all provisions of the Plan and this Agreement, including the provisions in this Agreement regarding “Misconduct and Competitor Conduct” and “Special Forfeiture and Repayment Rules” set forth in paragraph 5 above; and (c) represents that he or she understands that the acceptance of this Agreement through an on-line or electronic system, if applicable, carries the same legal significance as if he or she manually signed this Agreement. Awardee further acknowledges receiving a copy of the Company’s most recent annual report to shareholders and other communications routinely distributed to the Company’s shareholders and a copy of the Plan Description dated [date of Plan Description] pertaining to the Plan.

[

Awardee’s Signature

Date]

Exhibit 10.1.17

CARDINAL HEALTH, INC.

RESTRICTED SHARE UNITS AGREEMENT

This Restricted Share Units Agreement (this “Agreement”) is entered into in Franklin County, Ohio. On [grant date] (the “Grant Date”), Cardinal Health, Inc, an Ohio corporation (the “Company”), has awarded to [employee name] (“Awardee”) [# of shares] Restricted Share Units (the “Restricted Share Units” or “Award”), representing an unfunded unsecured promise of the Company to deliver common shares, without par value, of the Company (the “Shares”) to Awardee as set forth herein. The Restricted Share Units have been granted pursuant to the Cardinal Health, Inc. 2005 Long-Term Incentive Plan (As Amended and Restated as of November 5, 2008), as amended (the “Plan”), and shall be subject to all provisions of the Plan, which are incorporated herein by reference, and shall be subject to the provisions of this Agreement. Capitalized terms used in this Agreement which are not specifically defined shall have the meanings ascribed to such terms in the Plan.

1. Vesting . [CLIFF ALTERNATIVE: The Restricted Share Units shall vest on the [ ] anniversary of the Grant Date (the “Vesting Date”), subject to the provisions of this agreement, including those relating to the Awardee’s continued employment with the Company and its Affiliates (collectively, the “Cardinal Group”).] [INSTALLMENT ALTERNATIVE: The Restricted Share Units shall vest in [ ] installments, which shall be as nearly equal as possible, on the [ ] anniversaries of the Grant Date (each a “Vesting Date” with respect to the portion of the Restricted Share Units scheduled to vest on such date), subject in each case to the provisions of this Agreement, including those relating to the Awardee’s continued employment with the Company and its Affiliates (collectively, the “Cardinal Group”).] Notwithstanding the foregoing, in the event of a Change of Control prior to Awardee’s Termination of Employment, the Restricted Share Units shall vest in full.

2. Transferability . The Restricted Share Units shall not be transferable.

3. Termination of Employment .

(a) General . Except as set forth below, if a Termination of Employment occurs prior to the vesting of a Restricted Share Unit, such Restricted Share Unit shall be forfeited by Awardee immediately after such Termination of Employment.

(b) Death or Disability . If a Termination of Employment occurs prior to the vesting in full of the Restricted Share Units by reason of Awardee’s death or Disability, but at least 6 months from the Grant Date, then any unvested Restricted Share Units shall immediately vest in full and shall not be forfeited.

(c) Retirement . If a Termination of Employment occurs prior to the vesting in full of the Restricted Share Units by reason of Awardee’s Retirement, but at least 6 months from the Grant Date, then a Ratable Portion of each installment of the Restricted Share Units that would have vested on each future Vesting Date shall immediately vest and not be forfeited. Such Ratable Portion shall, with respect to the applicable installment, be an amount equal to such installment of the Restricted Share Units scheduled to vest on the applicable Vesting Date multiplied by a fraction, the numerator of which shall be the number of days from the Grant Date through the date of such termination, and the denominator of which shall be the number of days from the Grant Date through such Vesting Date. For purposes of this Agreement and this Award under the Plan, “Retirement” shall refer to Age 55 Retirement, which means Termination of Employment by a Participant (other than by reason of death or Disability and other than in the event of Termination for Cause) from the Company and its Affiliates (a) after attaining age fifty-five (55), and (b) having at least ten (10) years of continuous service with the Company and its Affiliates, including service

with an Affiliate of the Company prior to the time that such Affiliate became an Affiliate of the Company. For purposes of the age and/or service requirement, the Administrator may, in its discretion, credit a Participant with additional age and/or years of service.

4. Special Forfeiture and Repayment Rules . This Agreement contains special forfeiture and repayment rules intended to encourage conduct that protects the Cardinal Group’s legitimate business assets and discourage conduct that threatens or harms those assets. The Company does not intend to have the benefits of this Agreement reward or subsidize conduct detrimental to the Company, and therefore will require the forfeiture of the benefits offered under this Agreement and the repayment of gains obtained from this Agreement, according to the rules specified below. Activities that trigger the forfeiture and repayment rules are divided into two categories: Misconduct and Competitor Conduct.

(i) Awardee immediately forfeits the Restricted Share Units that have not yet vested or that vested at any time within three years prior to the Misconduct and have not yet been paid pursuant to Paragraph 5 hereof, and those forfeited Restricted Share Units shall automatically terminate, and

(ii) Awardee shall, within 30 days following written notice from the Company, pay the Company an amount equal to (A) the gross gain to Awardee resulting from the payment of Restricted Share Units pursuant to Paragraph 5 hereof that had vested at any time within three years prior to the date the Misconduct first occurred (as determined by the Administrator) less (B) $1.00. The gross gain is the market value of the Shares represented by the Restricted Share Units on the date of receipt.

As used in this Agreement, “ Misconduct ” means

(B) violation of applicable Cardinal Group policies, including but not limited to conduct which would constitute a breach of any representation or certificate of compliance signed by Awardee;

(G) breaching any provision of any employment or severance agreement with a member of the Cardinal Group.

(b) Competitor Conduct . If Awardee chooses to engage in Competitor Conduct during employment or within one year after the Termination of Employment for any reason, then

(i) Awardee immediately forfeits the Restricted Share Units that have not yet vested or that vested at any time within one year prior to the Competitor Conduct and have not yet been paid pursuant to Paragraph 5 hereof, and those forfeited Restricted Share Units shall automatically terminate, and

(ii) Awardee shall, within 30 days following written notice from the Company, pay the Company an amount equal to (A) the gross gain to Awardee resulting from the payment of Restricted Share Units pursuant to Paragraph 5 hereof that had vested at any time since the earlier of one year prior to the date the Competitor Conduct first occurred (as determined by the Administrator) or one year prior to the Termination of Employment, if applicable, less (B) $1.00. The gross gain is the market value of the Shares represented by the Restricted Share Units on the date of receipt.

(i) Nothing in this Paragraph 4 shall constitute or be construed as a “noncompete” covenant or other restraint on employment or trade. The provisions of this paragraph do not prevent, nor are they intended to prevent, Awardee from seeking or accepting employment or other work outside the Cardinal Group. The execution of this Agreement is voluntary. Awardee is free to choose to comply with the terms of this Agreement and receive the benefits offered or else reject this Agreement with no adverse consequences to Awardee’s employment with the Cardinal Group.

(ii) Awardee agrees to provide the Company with at least 10 days written notice prior to accepting employment with or providing services to a Competitor within one year after Termination of Employment.

(iii) Awardee acknowledges receiving sufficient consideration for the requirements of this Paragraph 4, including Awardee’s receipt of the Restricted Share Units. Awardee further acknowledges that the Company would not provide the Restricted Share Units to Awardee without Awardee’s promise to abide by the terms of this Paragraph 4. The parties also acknowledge that the provisions contained in this Paragraph 4 are ancillary to, or part of, an otherwise enforceable agreement at the time this Agreement is made.

(iv) Awardee may be released from the obligations of this Paragraph 4 if and only if the Administrator determines, in writing and in the Administrator’s sole discretion, that a release is in the best interests of the Company.

5. Payment.

(a) General . Subject to the provisions of Paragraph 4 of this Agreement and Paragraphs 5(b), (c), and (d) below, and unless Awardee makes an effective election to defer receipt of the Shares represented by the Restricted Share Units, on the date of vesting of any Restricted Share Unit, Awardee shall be entitled to receive from the Company (without any payment on behalf of Awardee other than as described in Paragraph 10) the Shares represented by such Restricted Share Unit.

(b) Death . Notwithstanding anything herein to the contrary, in the event that such Restricted Share Units vest prior to the applicable Vesting Date as a result of Awardee’s Termination of Employment due to death, Awardee shall be entitled to receive the corresponding Shares from the Company on the date of such vesting.

(c) Disability and Retirement . Notwithstanding anything herein to the contrary, in the event that such Restricted Share Units vest prior to the applicable Vesting Date as a result of Awardee’s Termination of Employment due to Disability or Retirement, Awardee shall be entitled to receive the corresponding Shares from the Company on the date that is the first day of the seventh month after the date of Awardee’s “separation from service” with the Cardinal Group (determined in accordance with Section 409A of the Code).

(d) Change of Control . Notwithstanding anything herein to the contrary, in the event that such Restricted Share Units vest prior to the applicable Vesting Date as a result of a Change of Control, Awardee shall be entitled to receive the corresponding Shares from the Company on the date of such vesting; provided, however, that if Restricted Share Units vest as a result of the occurrence of a Change of Control under circumstances where such occurrence would not qualify as a permissible date of distribution under Section 409A(a)(2)(A) of the Code, and the regulations thereunder, and where Section 409A of the Code applies to such distribution, Awardee shall be entitled to receive the corresponding Shares from the Company on the date that would have otherwise applied pursuant to Paragraphs 5(a), (b), or (c).

(e) Elections to Defer Receipt . Elections to defer receipt of the Shares beyond the date of payment provided herein may be permitted in the discretion of the Administrator pursuant to procedures established by the Administrator in compliance with the requirements of Section 409A of the Code.

6. Dividend Equivalents . Awardee shall not receive cash dividends on the Restricted Share Units but instead shall, with respect to each Restricted Share Unit, receive a cash payment from the Company on each cash dividend payment date with respect to the Shares with a record date between the Grant Date and the payment of such unit pursuant to Paragraph 5 hereof, such cash payment to be in an amount equal to the dividend that would have been paid on the Common Share represented by such unit. Cash payments on each cash dividend payment date with respect to the Shares with a record date prior to a Vesting Date shall be accrued until the Vesting Date and paid thereon (subject to the same vesting requirements as the underlying Restricted Share Units award).

7. Holding Period Requirement . If Awardee is classified as an “officer” of the Company within the meaning of Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended, on the Grant Date, then, as a condition to receipt of the Restricted Share Units, Awardee hereby agrees to hold, until the first anniversary of the applicable Vesting Date (or, if earlier, the date of Awardee’s Termination of Employment), the Shares issued pursuant to payment of such units (less any portion thereof withheld in order to satisfy all applicable federal, state, local or foreign income, employment or other tax).

8. Right of Set-Off . By accepting these Restricted Share Units, Awardee consents to a deduction from, and set-off against, any amounts owed to Awardee that are not treated as “non-qualified deferred compensation” under Section 409A of the U.S. Internal Revenue Code of 1986, as amended, by any member of the Cardinal Group from time to time (including, but not limited to, amounts owed to Awardee as wages, severance payments or other fringe benefits) to the extent of the amounts owed to the Cardinal Group by Awardee under this Agreement.

9. No Shareholder Rights . Awardee shall have no rights of a shareholder with respect to the Restricted Share Units, including, without limitation, Awardee shall not have the right to vote the Shares represented by the Restricted Share Units.

10. Withholding Tax .

(a) Generally . Awardee is liable and responsible for all taxes owed in connection with the Restricted Share Units (including taxes owed with respect to the cash payments described in Paragraph 6 hereof), regardless of any action the Company takes with respect to any tax withholding obligations that arise in connection with the Restricted Share Units. The Company does not make any representation or undertaking regarding the tax treatment or the treatment of any tax withholding in connection with the grant or vesting of the Restricted Share Units or the subsequent sale of Shares issuable pursuant to the Restricted Share Units. The Company does not commit and is under no obligation to structure the Restricted Share Units to reduce or eliminate Awardee’s tax liability.

(b) Payment of Withholding Taxes . Prior to any event in connection with the Restricted Share Units (e.g., vesting or payment) that the Company determines may result in any domestic or foreign tax withholding obligation, whether national, federal, state or local, including any employment tax obligation (the “Tax Withholding Obligation”), Awardee is required to arrange for the satisfaction of the minimum amount of such Tax Withholding Obligation in a manner acceptable to the Company. Unless Awardee elects to satisfy the Tax Withholding Obligation by an alternative means that is then permitted by the Company, Awardee’s acceptance of this Agreement constitutes Awardee’s instruction and authorization to the Company to withhold on Awardee’s behalf the number of Shares from those Shares issuable to Awardee under this Award as the Company determines to be sufficient to satisfy the Tax Withholding Obligation as and when any such Tax Withholding Obligation becomes due. In the case of any amounts withheld for taxes pursuant to this provision in the form of Shares, the amount withheld shall not exceed the minimum required by applicable law and regulations. The Company shall have the right to deduct from all cash payments paid pursuant to Paragraph 6 hereof the amount of any taxes which the Company is required to withhold with respect to such payments.

11. Governing Law/Venue for Dispute Resolution/Costs and Legal Fees . This Agreement shall be governed by the laws of the State of Ohio, without regard to principles of conflicts of law, except to the extent superseded by the laws of the United States of America. The parties agree and acknowledge that the laws of the State of Ohio bear a substantial relationship to the parties and/or this Agreement and that the Restricted Share Units and benefits granted herein would not be granted without the

governance of this Agreement by the laws of the State of Ohio. In addition, all legal actions or proceedings relating to this Agreement shall be brought exclusively in state or federal courts located in Franklin County, Ohio and the parties executing this Agreement hereby consent to the personal jurisdiction of such courts. Awardee acknowledges that the covenants contained in Paragraph 4 of this Agreement are reasonable in nature, are fundamental for the protection of the Company’s legitimate business and proprietary interests, and do not adversely affect Awardee’s ability to earn a living. In the event that it becomes necessary for the Company to institute legal proceedings under this Agreement, Awardee shall be responsible to the Company for all costs and reasonable legal fees incurred by the Company in connection with the proceedings. Any provision of this Agreement which is determined by a court of competent jurisdiction to be invalid or unenforceable should be construed or limited in a manner that is valid and enforceable and that comes closest to the business objectives intended by the provision, without invalidating or rendering unenforceable the remaining provisions of this Agreement.

12. Action by the Administrator . The parties agree that the interpretation of this Agreement shall rest exclusively and completely within the sole discretion of the Administrator. The parties agree to be bound by the decisions of the Administrator with regard to the interpretation of this Agreement and with regard to any and all matters set forth in this Agreement. In fulfilling its responsibilities hereunder, the Administrator may rely upon documents, written statements of the parties or other material as the Administrator deems appropriate. The parties agree that there is no right to be heard or to appear before the Administrator and that any decision of the Administrator relating to this Agreement, including, without limitation, whether particular conduct constitutes Misconduct or Competitor Conduct, shall be final and binding. The Administrator may delegate its functions under this Agreement to an officer of the Cardinal Group designated by the Administrator.

13. Prompt Acceptance of Agreement . The Restricted Share Unit grant evidenced by this Agreement shall, at the discretion of the Administrator, be forfeited if this Agreement is not manually executed and returned to the Company, or electronically executed by Awardee by indicating Awardee’s acceptance of this Agreement in accordance with the acceptance procedures set forth on the Company’s third-party equity plan administrator’s web site, within 90 days of the Grant Date.

14. Electronic Delivery and Consent to Electronic Participation . The Company may, in its sole discretion, decide to deliver any documents related to the Restricted Share Unit grant under and participation in the Plan or future Restricted Share Units that may be granted under the Plan by electronic means or to request Awardee’s consent to participate in the Plan by electronic means. Awardee hereby consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company, including the acceptance of restricted share unit grants and the execution of restricted share unit agreements through electronic signature.

15. Notices . All notices, requests, consents and other communications required or provided under this Agreement to be delivered by Awardee to the Company will be in writing and will be deemed sufficient if delivered by hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to the Company at the address set forth below:

Cardinal Health, Inc.

7000 Cardinal Place

Dublin, Ohio 43017

Attention: General Counsel

Facsimile: (614) 757-5051

16. Employment Agreement, Offer Letter or Other Arrangement . To the extent a written employment agreement, offer letter or other arrangement (“Employment Arrangement”) that was approved by the Human Resources and Compensation Committee or the Board of Directors or that was approved in writing by an officer of the Company pursuant to delegated authority of the Human Resources and Compensation Committee provides for greater benefits to Awardee with respect to vesting of the Award on Termination of Employment, than provided in this Agreement or in the Plan, then the terms of such Employment Arrangement with respect to vesting of the Award on Termination of Employment by reason of such specified events shall supersede the terms hereof to the extent permitted by the terms of the Plan.

17. Amendment . Any amendment to the Plan will be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall impair the rights of Awardee with respect to an outstanding Restricted Share Unit, unless mutually agreed otherwise between Awardee and the Administrator, which agreement must be in writing and signed by Awardee and the Company, except that no such agreement shall be required if the Administrator determines in its sole discretion that such amendment either (a) is required or advisable in order for the Company, the Plan or the Restricted Share Units to satisfy any Applicable Law or to meet the requirements of any accounting standard, or (b) is not reasonably likely to significantly diminish the benefits provided under the Restricted Share Units, or that any such diminishment has been adequately compensated, except following a Change of Control affect the rights of Awardee with respect to the Restricted Share Units without Awardee’s consent.


CARDINAL HEALTH, INC.

By:
Its:

ACCEPTANCE OF AGREEMENT

Awardee hereby: (a) acknowledges that he or she has received a copy of the Plan, a copy of the Company’s most recent annual report to shareholders and other communications routinely distributed to the Company’s shareholders, and a copy of the Plan Description dated [date of Plan Description] pertaining to the Plan; (b) accepts this Agreement and the Restricted Share Units granted to him or her under this Agreement subject to all provisions of the Plan and this Agreement, including the provisions in the agreement regarding “Misconduct and Competitor Conduct” and “Special Forfeiture and Repayment Rules” set forth in Paragraph 4 above; (c) represents that he or she understands that the acceptance of this Agreement through an on-line or electronic system, if applicable, carries the same legal significance as if he or she manually signed the Agreement; (d) represents and warrants to the Company that he or she is purchasing the Restricted Share Units for his or her own account, for investment, and not with a view to or any present intention of selling or distributing the Restricted Share Units either now or at any specific or determinable future time or period or upon the occurrence or nonoccurrence of any predetermined or reasonably foreseeable event; and (e) agrees that no transfer of the Shares delivered in respect of the Restricted Share Units shall be made unless the Shares have been duly registered under all applicable Federal and state securities laws pursuant to a then-effective registration which contemplates the proposed transfer or unless the Company has received a written opinion of, or satisfactory to, its legal counsel that the proposed transfer is exempt from such registration.


[
Awardee’s Signature


Date]

Exhibit 10.2.11

CARDINAL HEALTH, INC.

RESTRICTED SHARES AGREEMENT

This Agreement is entered into in Franklin Country, Ohio. On [grant date] (the “Grant Date”), Cardinal Health, Inc., an Ohio corporation (the “Company”), has awarded to [employee name] (“Awardee”), [# of shares] common shares, without par value, of the Company (the “Restricted Shares”). The Restricted Shares have been granted pursuant to the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (the “Plan”), and shall be subject to all provisions of the Plan, which are incorporated herein by reference, and shall be subject to the provisions of this Restricted Shares Agreement (this “Agreement”). Capitalized terms used in this Agreement which are not specifically defined shall have the meanings ascribed to such terms in the Plan.

1. Vesting . Subject to the provisions set forth elsewhere in this Agreement, the Restricted Shares shall vest [CLIFF ALTERNATIVE: on [vesting date]] [INSTALLMENT ALTERNATIVE: in accordance with the following schedule: [vesting schedule] (each such vesting date, the “Vesting Date” with respect to the Restricted Shares scheduled to vest on such date)]. Notwithstanding the foregoing, in the event of a Change of Control prior to Awardee’s Termination of Employment, the Restricted Shares shall vest in full.

2. Transferability . Prior to the applicable vesting of a Restricted Share, Awardee shall not be permitted to sell, transfer, pledge, assign or otherwise encumber the then unvested Restricted Share, except as otherwise provided in Paragraph 3 of this Agreement.

3. Termination of Employment.

(a) General . Except as set forth below, if a Termination of Employment occurs prior to the vesting of a Restricted Share, such Restricted Share shall be forfeited by Awardee.

(b) Death or Disability . If a Termination of Employment occurs prior to the vesting in full of the Restricted Shares by reason of Awardee’s death or Disability, but at least 6 months from the Grant Date, then the restrictions with respect to any unvested Restricted Shares shall immediately lapse and such Restricted Shares shall vest in full and shall not be forfeited.

(c) Retirement . If a Termination of Employment occurs prior to the vesting in full of the Restricted Shares by reason of the Awardee’s Retirement, but at least 6 months from the Grant Date, then a Ratable Portion of each installment of the Restricted Shares that would have vested on each future Vesting Date shall immediately vest and become exercisable. Such Ratable Portion shall, with respect to the applicable installment, be an amount equal to such installment of the Restricted Shares scheduled to vest on the applicable Vesting Date multiplied by a fraction, the numerator of which shall be the number of days from the Grant Date through the date of such termination, and the denominator of which shall be the number of days from the Grant Date through such Vesting Date. For purposes of this Agreement and this Award under the Plan, “Retirement” shall refer to Age 55 Retirement, which means Termination of Employment by a Participant (other than by reason of death or Disability and other than in the event of Termination for Cause) from the Company and its Affiliates (a) after attaining age fifty-five (55), and (b) having at least ten (10) years of continuous service with the Company and its Affiliates, including service with an Affiliate of the Company prior to the time that such Affiliate became an Affiliate of the Company. For purposes of the age and/or service requirement, the Administrator may, in its discretion, credit a Participant with additional age and/or years of service.

4. Triggering Conduct/Competitor Triggering Conduct . As used in this Agreement, “Triggering Conduct” shall include the following: disclosing or using in any capacity other than as necessary in the performance of duties assigned by the Company and its Affiliates (collectively, the “Cardinal Group”) any confidential information, trade secrets or other business sensitive information or material concerning the Cardinal Group; violation of Company policies, including conduct which would constitute a breach of any of the Certificates of Compliance with Company Policies and/or the Certificates of Compliance with Company Business Ethics Policies signed by Awardee; directly or indirectly employing, contacting concerning employment, or participating in any way in the recruitment for employment of (whether as an employee, officer, director, agent, consultant or independent contractor), any person who was or is an employee, representative, officer or director of the Cardinal Group at any time within the 12 months prior to Awardee’s Termination of Employment; any action by Awardee and/or his or her representatives that either does or could reasonably be expected to undermine, diminish or otherwise damage the relationship between the Cardinal Group and any of its customers, potential customers, vendors and/or suppliers that were known to Awardee; and breaching any provision of any employment or severance agreement with a member of the Cardinal Group. As used in this Agreement, “Competitor Triggering Conduct” shall include, either during Awardee’s employment or within one year following Termination of Employment, accepting employment with or serving as a consultant or advisor or in any other capacity to an entity that is in competition with the business conducted by any member of the Cardinal Group (a “Competitor”), including, but not limited to, employment or another business relationship with any Competitor if Awardee has been introduced to trade secrets, confidential information or business sensitive information during Awardee’s employment with the Cardinal Group and such information would aid the Competitor because the threat of disclosure of such information is so great that, for purposes of this Agreement, it must be assumed that such disclosure would occur.

5. Special Forfeiture/Repayment Rules . For so long as Awardee continues as an employee with the Cardinal Group and for three years following Termination of Employment regardless of the reason, Awardee agrees not to engage in Triggering Conduct. If Awardee engages in Triggering Conduct during the time period set forth in the preceding sentence or in Competitor Triggering Conduct during the time period referenced in the definition of “Competitor Triggering Conduct” set forth in Paragraph 4 above, then:

(a) any Restricted Shares that have not yet vested shall immediately and automatically terminate, be forfeited, and shall cease to exist; and

(b) Awardee shall, within 30 days following written notice from the Company, pay to the Company an amount equal to (x) the aggregate gross gain realized or obtained by Awardee resulting from the vesting of all Restricted Shares, measured as of the date of vesting ( i.e. , the market value of the Restricted Shares on the date of vesting), that have already vested at any time within three years prior to the Triggering Conduct (the “Look-Back Period”), minus (y) $1.00. If Awardee engages only in Competitor Triggering Conduct, then the Look-Back Period shall be shortened to exclude any period more than one year prior to Awardee’s Termination of Employment, but including any period between the time of Termination of Employment and the time of Awardee’s engaging in Competitor Triggering Conduct. Awardee may be released from Awardee’s obligations under this Paragraph 5 if and only if the Administrator (or its duly appointed designee) determines, in writing and in its sole discretion, that such action is in the best interests of the Company. Nothing in this Paragraph 5 constitutes a so-called “noncompete” covenant. This Paragraph 5 does, however, prohibit certain conduct while Awardee is associated with the Cardinal Group and thereafter and does provide for the forfeiture or repayment of the benefits granted by this Agreement under certain circumstances, including, but not limited to, Awardee’s acceptance of employment with a Competitor. Awardee agrees to provide the Company with at least 10 days written notice prior to directly or indirectly accepting employment with, or serving as a consultant or

advisor or in any other capacity to, a Competitor, and further agrees to inform any such new employer, before accepting employment, of the terms of this Paragraph 5 and Awardee’s continuing obligations contained herein. No provision of this Agreement shall diminish, negate or otherwise impact any separate noncompete or other agreement to which Awardee may be a party, including, but not limited to, any of the Certificates of Compliance with Company Policies and/or the Certificates of Compliance with Company Business Ethics Policies; provided, however, that to the extent that any provisions contained in any other agreement are inconsistent in any manner with the restrictions and covenants of Awardee contained in this Agreement, the provisions of this Agreement shall take precedence and such other inconsistent provisions shall be null and void. Awardee acknowledges and agrees that the provisions contained in this Agreement are being made for the benefit of the Company in consideration of Awardee’s receipt of the Restricted Shares, in consideration of employment, in consideration of exposing Awardee to the Company’s business operations and confidential information, and for other good and valuable consideration, the adequacy of which consideration is hereby expressly confirmed. Awardee further acknowledges that the receipt of the Restricted Shares and execution of this Agreement are voluntary actions on the part of Awardee and that the Company is unwilling to provide the Restricted Shares to Awardee without including the restrictions and covenants of Awardee contained in this Agreement. Further, the parties agree and acknowledge that the provisions contained in Paragraphs 4 and 5 are ancillary to, or part of, an otherwise enforceable agreement at the time the agreement is made.

6. Right of Set-Off . By accepting these Restricted Shares, Awardee consents to a deduction from, and set-off against, any amounts owed to Awardee by any member of the Cardinal Group from time to time (including, but not limited to, amounts owed to Awardee as wages, severance payments or other fringe benefits) to the extent of the amounts owed to the Cardinal Group by Awardee under this Agreement.

7. Shareholder Rights and Restrictions . Except with regard to the disposition of Restricted Shares and the receipt of dividends, Awardee shall generally have all rights of a shareholder with respect to the Restricted Shares from the Grant Date, including, without limitation, the right to vote such Restricted Shares, but subject, however, to those restrictions in this Agreement or in the Plan. Dividends with respect to the Restricted Shares shall be accrued until the Vesting Date for such Restricted Shares and paid thereon (subject to the same vesting requirements as the underlying Restricted Share award). Any additional Shares which the Awardee may become entitled to receive by virtue of a merger or reorganization in which the Company is the surviving corporation or any other change in capital structure shall be subject to the same vesting requirements and restrictions set forth above.

8. Withholding Tax .

(a) Generally . Awardee is liable and responsible for all taxes owed in connection with the Restricted Shares, regardless of any action the Company takes with respect to any tax withholding obligations that arise in connection with the Restricted Shares. The Company does not make any representation or undertaking regarding the tax treatment or treatment of any tax withholding in connection with the grant or vesting of the Restricted Shares or the subsequent sale of the Restricted Shares. The Company does not commit and is under no obligation to structure the Restricted Shares to reduce or eliminate Awardee’s tax liability.

(b) Payment of Withholding Taxes . Prior to any event in connection with the Restricted Shares (e.g., vesting) that the Company determines may result in any domestic or foreign tax withholding obligation, whether national, federal, state or local, including any employment tax obligation (the “Tax Withholding Obligation”), Awardee is required to arrange for the satisfaction of the minimum amount of such Tax Withholding Obligation in a manner acceptable to the Company. Unless Awardee elects to satisfy the Tax Withholding Obligation by an alternative means that is then permitted by the Company,

Awardee’s acceptance of this Agreement constitutes Awardee’s instruction and authorization to the Company to withhold on Awardee’s behalf the number of Restricted Shares when the Restricted Shares become vested as the Company determines to be sufficient to satisfy the Tax Withholding Obligation. In the case of any amounts withheld for taxes pursuant to this provision in the form of shares, the amount withheld shall not exceed the minimum required by applicable law and regulations.

9. Governing Law/Venue for Dispute Resolution/Costs and Legal Fees . This Agreement shall be governed by the laws of the State of Ohio, without regard to principles of conflicts of law, except to the extent superseded by the laws of the United States of America. The parties agree and acknowledge that the laws of the State of Ohio bear a substantial relationship to the parties and/or this Agreement and that the Restricted Shares and benefits granted herein would not be granted without the governance of this Agreement by the laws of the State of Ohio. In addition, all legal actions or proceedings relating to this Agreement shall be brought exclusively in state or federal courts located in Franklin County, Ohio, and the parties executing this Agreement hereby consent to the personal jurisdiction of such courts. Awardee acknowledges that the covenants contained in Paragraphs 4 and 5 of this Agreement are reasonable in nature, are fundamental for the protection of the Company’s legitimate business and proprietary interests, and do not adversely affect Awardee’s ability to earn a living in any capacity that does not violate such covenants. The parties further agree that in the event of any violation by Awardee of any such covenants, the Company will suffer immediate and irreparable injury for which there is no adequate remedy at law. In the event of any violation or attempted violations of the restrictions and covenants of Awardee contained in this Agreement, the Cardinal Group shall be entitled to specific performance and injunctive relief or other equitable relief, including the issuance ex parte of a temporary restraining order, without any showing of irreparable harm or damage, such irreparable harm being acknowledged and admitted by Awardee, and Awardee hereby waives any requirement for the securing or posting of any bond in connection with such remedy, without prejudice to any other rights and remedies afforded the Cardinal Group hereunder or by law. In the event that it becomes necessary for the Cardinal Group to institute legal proceedings under this Agreement, Awardee shall be responsible to the Company for all costs and reasonable legal fees incurred by the Company with regard to such proceedings. Any provision of this Agreement which is determined by a court of competent jurisdiction to be invalid or unenforceable should be construed or limited in a manner that is valid and enforceable and that comes closest to the business objectives intended by such provision, without invalidating or rendering unenforceable the remaining provisions of this Agreement.

10. Action by the Administrator . The parties agree that the interpretation of this Agreement shall rest exclusively and completely within the sole discretion of the Administrator. The parties agree to be bound by the decisions of the Administrator with regard to the interpretation of this Agreement and with regard to any and all matters set forth in this Agreement. The Administrator may delegate its functions under this Agreement to an officer of the Cardinal Group designated by the Administrator (hereinafter the “Designee”). In fulfilling its responsibilities hereunder, the Administrator or its Designee may rely upon documents, written statements of the parties or such other material as the Administrator or its Designee deems appropriate. The parties agree that there is no right to be heard or to appear before the Administrator or its Designee and that any decision of the Administrator or its Designee relating to this Agreement, including, without limitation, whether particular conduct constitutes Triggering Conduct or Competitor Triggering Conduct, shall be final and binding unless such decision is arbitrary and capricious.

11. Prompt Acceptance of Agreement . The Restricted Shares grant evidenced by this Agreement shall, at the discretion of the Administrator, be forfeited if this Agreement is not manually executed and returned to the Company, or electronically executed by Awardee by indicating Awardee’s acceptance of this Agreement in accordance with the acceptance procedures set forth on the Company’s third-party equity plan administrator’s web site, within 90 days of the Grant Date.

12. Electronic Delivery and Consent to Electronic Participation . The Company may, in its sole discretion, decide to deliver any documents related to the Restricted Shares grant under and participation in the Plan or future Restricted Shares that may be granted under the Plan by electronic means or to request Awardee’s consent to participate in the Plan by electronic means. Awardee hereby consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company, including the acceptance of restricted share grants and the execution of restricted share agreements through electronic signature.

Cardinal Health, Inc.

7000 Cardinal Place

Dublin, Ohio 43017

Attention: Chief Legal Officer

Facsimile: (614) 757-2797


CARDINAL HEALTH, INC.

By:
Its:

ACCEPTANCE OF AGREEMENT

Awardee hereby: (a) acknowledges that he or she has received a copy of the Plan, a copy of the Company’s most recent annual report to shareholders and other communications routinely distributed to the Company’s shareholders, and a copy of the Plan Description dated [date of Plan Description], pertaining to the Plan; (b) voluntarily and knowingly accepts this Agreement and the Restricted Shares granted to him or her under this Agreement subject to all provisions of the Plan and this Agreement, including the provisions in the Agreement regarding “Triggering Conduct/Competitor Triggering Conduct” and “Special Forfeiture/Repayment Rules” set forth in Paragraphs 4 and 5 above; (c) represents that he or she understands that the acceptance of this Agreement through an on-line or electronic system, if applicable, carries the same legal significance as if he or she manually signed the Agreement; (d) represents and warrants to the Company that he or she is purchasing the Restricted Shares for his or her own account, for investment, and not with a view to or any present intention of selling or distributing the Restricted Shares either now or at any specific or determinable future time or period or upon the occurrence or nonoccurrence of any predetermined or reasonably foreseeable event; and (e) agrees that no transfer of the Restricted Shares shall be made unless the Restricted Shares have been duly registered under all applicable Federal and state securities laws pursuant to a then-effective registration which contemplates the proposed transfer or unless the Company has received a written opinion of, or satisfactory to, its legal counsel that the proposed transfer is exempt from such registration.


[
Awardee’s Signature


Date]

Exhibit 10.2.12

CARDINAL HEALTH, INC.

RESTRICTED SHARES AGREEMENT

1. Vesting . [CLIFF ALTERNATIVE: The Restricted Shares shall vest on the [ ] anniversary of the Grant Date (the “Vesting Date”), subject to the provisions of this agreement, including those relating to the Awardee’s continued employment with the Company and its Affiliates (collectively, the “Cardinal Group”).] [INSTALLMENT ALTERNATIVE: The Restricted Shares shall vest in [ ] installments, which shall be as nearly equal as possible, on the first [ ] anniversaries of the Grant Date (each a “Vesting Date” with respect to the portion of the Restricted Shares scheduled to vest on such date), subject in each case to the provisions of this Agreement, including those relating to the Awardee’s continued employment with the Company and its Affiliates (collectively, the “Cardinal Group”).] Notwithstanding the foregoing, in the event of a Change of Control prior to Awardee’s Termination of Employment, the Restricted Shares shall vest in full.

3. Termination of Employment.

(a) General . Except as set forth below, if a Termination of Employment occurs prior to the vesting of a Restricted Share, such Restricted Share shall be forfeited by Awardee.

(c) Retirement . If a Termination of Employment occurs prior to the vesting in full of the Restricted Shares by reason of the Awardee’s Retirement, but at least 6 months from the Grant Date, then a Ratable Portion of each installment of the Restricted Shares that would have vested on each future Vesting Date shall immediately vest and not be forfeited. Such Ratable Portion shall, with respect to the applicable installment, be an amount equal to such installment of the Restricted Shares scheduled to vest on the applicable Vesting Date multiplied by a fraction, the numerator of which shall be the number of days from the Grant Date through the date of such termination, and the denominator of which shall be the number of days from the Grant Date through such Vesting Date. For purposes of this Agreement and this Award under the Plan, “Retirement” shall refer to Age 55 Retirement, which means Termination of Employment by a Participant (other than by reason of death or Disability and other than in the event of Termination for Cause) from the Company and its Affiliates (a) after attaining age fifty-five (55), and (b) having at least ten (10) years of continuous service with the Company and its Affiliates, including service with an Affiliate of the Company prior to the time that such Affiliate became an Affiliate of the Company. For purposes of the age and/or service requirement, the Administrator may, in its discretion, credit a Participant with additional age and/or years of service.

4. Triggering Conduct/Competitor Triggering Conduct . As used in this Agreement, “Triggering Conduct” shall include the following: disclosing or using in any capacity other than as necessary in the performance of duties assigned by the Cardinal Group any confidential information, trade secrets or other business sensitive information or material concerning the Cardinal Group; violation of Company policies, including but not limited to conduct which would constitute a breach of any certificate of compliance or similar attestation/certification signed by Awardee; directly or indirectly employing, contacting concerning employment, or participating in any way in the recruitment for employment of (whether as an employee, officer, director, agent, consultant or independent contractor), any person who was or is an employee, representative, officer or director of the Cardinal Group at any time within the 12 months prior to Awardee’s Termination of Employment; any action by Awardee and/or his or her representatives that either does or could reasonably be expected to undermine, diminish or otherwise damage the relationship between the Cardinal Group and any of its customers, potential customers, vendors and/or suppliers that were known to Awardee; and breaching any provision of any employment or severance agreement with a member of the Cardinal Group. As used in this Agreement, “Competitor Triggering Conduct” shall include, either during Awardee’s employment or within one year following Termination of Employment, accepting employment with or serving as a consultant or advisor or in any other capacity to an entity that is in competition with the business conducted by any member of the Cardinal Group (a “Competitor”), including, but not limited to, employment or another business relationship with any Competitor if Awardee has been introduced to trade secrets, confidential information or business sensitive information during Awardee’s employment with the Cardinal Group and such information would aid the Competitor because the threat of disclosure of such information is so great that, for purposes of this Agreement, it must be assumed that such disclosure would occur.

(a) any Restricted Shares that have not yet vested shall immediately and automatically terminate, be forfeited, and shall cease to exist; and

days written notice prior to directly or indirectly accepting employment with, or serving as a consultant or advisor or in any other capacity to, a Competitor, and further agrees to inform any such new employer, before accepting employment, of the terms of this Paragraph 5 and Awardee’s continuing obligations contained herein. No provision of this Agreement shall diminish, negate or otherwise impact any separate noncompete or other agreement to which Awardee may be a party, including, but not limited to, any certificate of compliance or similar attestation/certification signed by Awardee; provided, however, that to the extent that any provisions contained in any other agreement are inconsistent in any manner with the restrictions and covenants of Awardee contained in this Agreement, the provisions of this Agreement shall take precedence and such other inconsistent provisions shall be null and void. Awardee acknowledges and agrees that the provisions contained in this Agreement are being made for the benefit of the Company in consideration of Awardee’s receipt of the Restricted Shares, in consideration of employment, in consideration of exposing Awardee to the Company’s business operations and confidential information, and for other good and valuable consideration, the adequacy of which consideration is hereby expressly confirmed. Awardee further acknowledges that the receipt of the Restricted Shares and execution of this Agreement are voluntary actions on the part of Awardee and that the Company is unwilling to provide the Restricted Shares to Awardee without including the restrictions and covenants of Awardee contained in this Agreement. Further, the parties agree and acknowledge that the provisions contained in Paragraphs 4 and 5 are ancillary to, or part of, an otherwise enforceable agreement at the time the agreement is made.

8. Withholding Tax .

satisfy the Tax Withholding Obligation by an alternative means that is then permitted by the Company, Awardee’s acceptance of this Agreement constitutes Awardee’s instruction and authorization to the Company to withhold on Awardee’s behalf the number of Restricted Shares when the Restricted Shares become vested as the Company determines to be sufficient to satisfy the Tax Withholding Obligation. In the case of any amounts withheld for taxes pursuant to this provision in the form of shares, the amount withheld shall not exceed the minimum required by applicable law and regulations.

Cardinal Health, Inc.

7000 Cardinal Place

Dublin, Ohio 43017

Attention: Chief Legal Officer

Facsimile: (614) 757-2797

14. Employment Agreement, Offer Letter or Other Arrangement . To the extent a written employment agreement, offer letter or other arrangement (“Employment Arrangement”) that was approved by the Human Resources and Compensation Committee or the Board of Directors or that was approved in writing by an officer of the Company pursuant to delegated authority of the Human Resources and Compensation Committee provides for greater benefits to Awardee with respect to vesting of the Award on Termination of Employment, than provided in this agreement or in the plan, then the terms of such Employment Arrangement with respect to vesting of the Award on Termination of Employment by reason of such specified events shall supersede the terms hereof to the extent permitted by the terms of the plan under which the Award was made.


CARDINAL HEALTH, INC.

By:
Its:

ACCEPTANCE OF AGREEMENT

Awardee hereby: (a) acknowledges that he or she has received a copy of the Plan, a copy of the Company’s most recent annual report to shareholders and other communications routinely distributed to the Company’s shareholders, and a copy of the Plan Description dated [date of Plan Description], pertaining to the Plan; (b) voluntarily and knowingly accepts this Agreement and the Restricted Shares granted to him or her under this Agreement subject to all provisions of the Plan and this Agreement, including the provisions in the Agreement regarding “Triggering Conduct/Competitor Triggering Conduct” and “Special Forfeiture/Repayment Rules” set forth in Paragraphs 4 and 5 above; (c) represents that he or she understands that the acceptance of this Agreement through an on-line or electronic system, if applicable, carries the same legal significance as if he or she manually signed the Agreement; (d) represents and warrants to the Company that he or she is purchasing the Restricted Shares for his or her own account, for investment, and not with a view to or any present intention of selling or distributing the Restricted Shares either now or at any specific or determinable future time or period or upon the occurrence or nonoccurrence of any predetermined or reasonably foreseeable event; and (e) agrees that no transfer of the Restricted Shares shall be made unless the Restricted Shares have been duly registered under all applicable Federal and state securities laws pursuant to a then-effective registration which contemplates the proposed transfer or unless the Company has received a written opinion of, or satisfactory to, its legal counsel that the proposed transfer is exempt from such registration.


[
Awardee’s Signature


Date]

Exhibit 10.5.3

R ESTRICTED S HARES

(U.S. C ARDINAL E MPLOYEES (C URRENT AND F ORMER ))

A DJUSTMENTS TO C ARDINAL H EALTH R ESTRICTED S HARE A WARDS AND T ERMS OF

C ARE F USION R ESTRICTED S HARE A WARDS

August 31, 2009

•

With respect to each outstanding restricted share award initially granted by Cardinal Health to you on or prior to September 26, 2007 (each, a “ Pre-2007 Cardinal Restricted Share ”) pursuant to the terms of Cardinal Health’s 2005 Long-Term Incentive Plan, as amended and restated effective as of November 5, 2008 (the “ Cardinal LTIP ”), and related grant agreements (the “ Cardinal Health Restricted Share Agreements ”), you are receiving, as of the effective time of the Spin-Off, 0.5 shares of restricted common stock of CareFusion Corporation (each, a “ CareFusion Restricted Share ”) for each Pre-2007 Cardinal Restricted Share. Your Pre-2007 Cardinal Restricted Shares will otherwise be unaffected by the Spin-Off.

•

Each outstanding restricted share award initially granted to you after September 26, 2007 (each, a “ Post-2007 Cardinal Restricted Share ”) will be cancelled and new Cardinal Health restricted shares will be issued to you (each, a “ New Cardinal Health Restricted Share ”) as of the effective time of the Spin-Off.

Pre-2007 Cardinal Restricted Shares

Your Pre-2007 Cardinal Restricted Shares will continue to be governed by, and subject to the restrictions set forth in, (i) your Cardinal Health Restricted Share Agreements, as amended (including the provisions in the agreements relating to “Triggering Conduct/Competitor Triggering Conduct” and “Special Forfeiture/Repayment Rules”) and (ii) the Cardinal LTIP. Please note that CareFusion Corporation (“ CareFusion ”) and its affiliates are third party beneficiaries of all rights that benefit CareFusion with respect to your Pre-2007 Cardinal Restricted Shares and as a result CareFusion may enforce with full force and effect all terms and conditions that benefit CareFusion with respect to such restricted shares.

New Cardinal Health Restricted Shares

Your New Cardinal Health Restricted Shares are granted under, and subject to, the terms and conditions of the Cardinal LTIP. They are also subject to the terms and conditions set forth on Appendix A attached hereto (the “ New Cardinal Health Restricted Shares Agreement ”), which, except for the number of shares subject to the award, are the same terms that applied to your Post-2007 Cardinal Restricted Shares as set forth in the Cardinal Health Restricted Share Agreement for such award (including

R ESTRICTED S HARES

(U.S. C ARDINAL E MPLOYEES (C URRENT AND F ORMER ))

paragraphs 4 and 5 of the agreement regarding “Triggering Conduct/Competitor Triggering Conduct” and “Special Forfeiture/Repayment Rules”). The number of shares subject to each New Cardinal Health Restricted Share can be found on the website of Cardinal Health’s third-party equity plan administrator. The New Cardinal Health Restricted Shares Agreement and its terms have been approved by the Human Resources and Compensation Committee of Cardinal Health.

CareFusion Restricted Shares

Your CareFusion Restricted Shares are granted under, and subject to, the terms and conditions of the CareFusion Corporation 2009 Long-Term Incentive Plan. They are also subject to the terms of the Cardinal Health Restricted Share Agreement for the corresponding Pre-2007 Cardinal Restricted Shares (including paragraphs 3 and 4 of the agreement regarding “Triggering Conduct/Competitor Triggering Conduct” and “Special Forfeiture/Repayment Rules”) and the Cardinal LTIP, which have been adjusted and restated on Appendix B attached hereto for purposes of applying them to your CareFusion Restricted Shares and have been approved by the Human Resources and Compensation Committees of Cardinal Health and CareFusion. Please note that Cardinal Health and its affiliates are third party beneficiaries of all rights that benefit Cardinal Health with respect to your CareFusion Restricted Shares and as a result Cardinal Health may enforce with full force and effect all terms and conditions that benefit Cardinal Health with respect to such restricted shares.

R ESTRICTED S HARES

(U.S. C ARDINAL E MPLOYEES (C URRENT AND F ORMER ))

Appendix A

CARDINAL HEALTH, INC.

RESTRICTED SHARES AGREEMENT

As a result of the separation of the clinical and medical products businesses of Cardinal Health, Inc. (“Cardinal Health”) by means of a spin-off of at least 80.1% of the outstanding common stock of CareFusion Corporation to Cardinal Health’s shareholders, effective on August 31, 2009 (the “Spin-Off”) and cancellation of outstanding restricted share awards (the “Original Restricted Shares”) that were granted to Awardee on a certain date occurring after September 26, 2007 (the “Original Grant Date”), Cardinal Health has awarded to Awardee a certain number of common shares, without par value, of Cardinal Health, subject to certain restrictions (the “New Cardinal Health Restricted Shares”). The “Number of Shares” that are covered by the New Cardinal Health Restricted Shares can be found on the website of Cardinal Health’s third-party equity plan administrator.

The New Cardinal Health Restricted Shares have been granted pursuant to the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, amended and restated effective as of November 8, 2005 (the “Plan”), and shall be subject to all provisions of the Plan, which are incorporated herein by reference, and all provisions of this Restricted Shares Agreement (this “Agreement”).

Capitalized terms used in this Agreement which are not specifically defined herein will have the meanings ascribed to such terms in the Plan.

1. Vesting . Subject to the provisions set forth elsewhere in this Agreement and unless a vesting schedule for the Original Restricted Shares provides otherwise, the New Cardinal Health Restricted Shares shall vest in accordance with the following schedule: 33.33% of the New Cardinal Health Restricted Shares shall vest on the first anniversary of the Original Grant Date, an additional 33.33% of the New Cardinal Health Restricted Shares shall vest on the second anniversary of the Original Grant Date, and the final 33.34% of the New Cardinal Health Restricted Shares shall vest on the third anniversary of the Original Grant Date (each such vesting date being the “Vesting Date” with respect to the New Cardinal Health Restricted Shares scheduled to vest on such date). If the vesting schedule for the Original Restricted Shares provides otherwise, then the New Cardinal Health Restricted Shares shall vest in accordance with the schedule applicable to the Original Restricted Shares.

2. Transferability . Prior to the applicable vesting of the New Cardinal Health Restricted Shares, Awardee shall not be permitted to sell, transfer, pledge, assign or otherwise encumber the then unvested New Cardinal Health Restricted Shares, except as otherwise provided in paragraph 3 of this Agreement.

3. Termination of Employment .

(a) General . Except as set forth below, if a Termination of Employment occurs prior to the vesting of the New Cardinal Health Restricted Shares, such New Cardinal Health Restricted Shares shall be forfeited by Awardee.

(b) Death or Disability . If a Termination of Employment occurs prior to the vesting in full of the New Cardinal Health Restricted Shares by reason of Awardee’s death or Disability, but at least 6 months from the Original Grant Date, then the restrictions with respect to any unvested New Cardinal Health Restricted Shares shall immediately lapse and such New Cardinal Health Restricted Shares shall vest in full and shall not be forfeited.

R ESTRICTED S HARES

(U.S. C ARDINAL E MPLOYEES (C URRENT AND F ORMER ))

(c) Retirement . If a Termination of Employment occurs prior to the vesting in full of the New Cardinal Health Restricted Shares by reason of Awardee’s Retirement, but at least 6 months from the Original Grant Date, then a Ratable Portion of each installment of the New Cardinal Health Restricted Shares that would have vested on each future Vesting Date shall immediately vest and not be forfeited. Such Ratable Portion shall, with respect to the applicable installment, be an amount equal to such installment of the New Cardinal Health Restricted Shares scheduled to vest on the applicable Vesting Date multiplied by a fraction, the numerator of which shall be the number of days from the Original Grant Date through the date of such termination, and the denominator of which shall be the number of days from the Original Grant Date through such Vesting Date. For purposes of this Agreement and this Award under the Plan, “Retirement” shall refer to Age 55 Retirement, which means Termination of Employment by a Participant (other than by reason of death or Disability and other than in the event of Termination for Cause) from the Cardinal Group (a) after attaining age fifty-five (55), and (b) having at least ten (10) years of continuous service with the Cardinal Group, including service with an Affiliate of Cardinal Health prior to the time that such Affiliate became an Affiliate of Cardinal Health. For purposes of the age and/or service requirement, the Administrator may, in its discretion, credit a Participant with additional age and/or years of service.

4. Triggering Conduct/Competitor Triggering Conduct . As used in this Agreement, “Triggering Conduct” shall include the following: disclosing or using in any capacity other than as necessary in the performance of duties assigned by the Cardinal Group any confidential information, trade secrets or other business sensitive information or material concerning the Cardinal Group; violation of Cardinal Health policies, including, but not limited to, conduct which would constitute a breach of any certificate of compliance or similar attestation/certification signed by Awardee; directly or indirectly employing, contacting concerning employment, or participating in any way in the recruitment for employment of (whether as an employee, officer, director, agent, consultant or independent contractor), any person who was or is an employee, representative, officer or director of the Cardinal Group at any time within the 12 months prior to Awardee’s Termination of Employment; any action by Awardee and/or his or her representatives that either does or could reasonably be expected to undermine, diminish or otherwise damage the relationship between the Cardinal Group and any of its customers, potential customers, vendors and/or suppliers that were known to Awardee; and breaching any provision of any employment or severance agreement with a member of the Cardinal Group. As used in this Agreement, “Competitor Triggering Conduct” shall include, either during Awardee’s employment or within one year following Termination of Employment, accepting employment with or serving as a consultant or advisor or in any other capacity to an entity that is in competition with the business conducted by any member of the Cardinal Group (a “Competitor”), including, but not limited to, employment or another business relationship with any Competitor if Awardee has been introduced to trade secrets, confidential information or business sensitive information during Awardee’s employment with the Cardinal Group and such information would aid the Competitor because the threat of disclosure of such information is so great that, for purposes of this Agreement, it must be assumed that such disclosure would occur.

(a) any New Cardinal Health Restricted Shares that have not yet vested shall immediately and automatically terminate, be forfeited, and shall cease to exist; and

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(b) Awardee shall, within 30 days following written notice from Cardinal Health, pay to Cardinal Health an amount equal to (x) the aggregate gross gain realized or obtained by Awardee resulting from the vesting of all New Cardinal Health Restricted Shares, measured as of the date of vesting ( i.e. , the market value of the New Cardinal Health Restricted Shares on the date of vesting), that have already vested at any time within three years prior to the Triggering Conduct (the “Look-Back Period”), minus (y) $1.00. If Awardee engages only in Competitor Triggering Conduct, then the Look-Back Period shall be shortened to exclude any period more than one year prior to Awardee’s Termination of Employment, but include any period between the time of Termination of Employment and the time of Awardee’s engaging in Competitor Triggering Conduct. Awardee may be released from Awardee’s obligations under this paragraph 5 if and only if the Administrator (or its duly appointed designee) determines, in writing and in its sole discretion, that such action is in the best interests of Cardinal Health. Nothing in this paragraph 5 constitutes a so-called “noncompete” covenant. This paragraph 5 does, however, prohibit certain conduct while Awardee is associated with the Cardinal Group and thereafter and does provide for the forfeiture or repayment of the benefits granted by this Agreement under certain circumstances, including, but not limited to, Awardee’s acceptance of employment with a Competitor. Awardee agrees to provide Cardinal Health with at least 10 days’ written notice prior to directly or indirectly accepting employment with, or serving as a consultant or advisor or in any other capacity to, a Competitor, and further agrees to inform any such new employer, before accepting employment, of the terms of this paragraph 5 and Awardee’s continuing obligations contained herein. No provision of this Agreement shall diminish, negate or otherwise impact any separate noncompete or other agreement to which Awardee may be a party, including, but not limited to, any certificate of compliance or similar attestation/certification signed by Awardee; provided, however, that to the extent that any provisions contained in any other agreement are inconsistent in any manner with the restrictions and covenants of Awardee contained in this Agreement, the provisions of this Agreement shall take precedence and such other inconsistent provisions shall be null and void. Awardee acknowledges and agrees that the provisions contained in this Agreement are being made for the benefit of Cardinal Health in consideration of Awardee’s receipt of the New Cardinal Health Restricted Shares, in consideration of employment, in consideration of exposing Awardee to Cardinal Health’s business operations and confidential information, and for other good and valuable consideration, the adequacy of which consideration is hereby expressly confirmed. Awardee further acknowledges that the receipt of the New Cardinal Health Restricted Shares and this Agreement are voluntary actions on the part of Awardee and Cardinal Health is unwilling to provide the New Cardinal Health Restricted Shares to Awardee without including the restrictions and covenants of Awardee contained in this Agreement. Further, Awardee and Cardinal Health agree and acknowledge that the provisions contained in paragraphs 4 and 5 are ancillary to, or part of, an otherwise enforceable agreement at the time the agreement is made.

6. Change of Control . Notwithstanding anything herein to the contrary, in the event a Change of Control occurs, on the date that such Change of Control occurs, the restrictions applicable to any unvested New Cardinal Health Restricted Shares shall lapse and the Award shall be fully vested.

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7. Right of Set-Off . Any amounts Awardee owes from time to time to any member of the Cardinal Group with respect to the New Cardinal Health Restricted Shares may be deducted from, and set-off against, any amounts owed to Awardee by any member of the Cardinal Group from time to time (including, but not limited to, amounts owed to Awardee as wages, severance payments or other fringe benefits). Any amounts Awardee owes from time to time to CareFusion Corporation or one of its affiliates with respect to the New Cardinal Health Restricted Shares may be deducted from, and set-off against, any amounts owed to Awardee by CareFusion Corporation or one of its affiliates from time to time (including, but not limited to, amounts owed to Awardee as wages, severance payments or other fringe benefits).

8. Shareholder Rights and Restrictions . Except with regard to the disposition of the New Cardinal Health Restricted Shares and the receipt of dividends, Awardee shall generally have all rights of a shareholder with respect to the New Cardinal Health Restricted Shares from the effective time of the Spin-Off, including, without limitation, the right to vote such New Cardinal Health Restricted Shares, but subject, however, to those restrictions set forth in this Agreement or in the Plan. Dividends with respect to the New Cardinal Health Restricted Shares shall be accrued until the Vesting Date for such New Cardinal Health Restricted Shares and paid thereon (subject to the same vesting requirements as the underlying New Cardinal Health Restricted Share award). In addition, if Awardee was entitled to one or more cash dividend payments under the Original Restricted Shares that had not been paid prior to the effective time of the Spin-Off, then the Company shall pay such cash dividends on the Vesting Date. Any additional Shares which Awardee may become entitled to receive by virtue of a merger or reorganization in which Cardinal Health is the surviving corporation or any other change in capital structure shall be subject to the same vesting requirements and restrictions set forth above.

9. Withholding Tax .

(a) Generally . Awardee is liable and responsible for all taxes owed in connection with the New Cardinal Health Restricted Shares, regardless of any action Cardinal Health takes with respect to any tax withholding obligations that arise in connection with the New Cardinal Health Restricted Shares. Cardinal Health does not make any representation or undertaking regarding the tax treatment or the treatment of any tax withholding in connection with the grant or vesting of the New Cardinal Health Restricted Shares or the subsequent sale of the New Cardinal Health Restricted Shares. Cardinal Health does not commit and is under no obligation to structure the New Cardinal Health Restricted Shares to reduce or eliminate Awardee’s tax liability.

(b) Payment of Withholding Taxes . Prior to any event in connection with the New Cardinal Health Restricted Shares ( e.g. , vesting) that Cardinal Health determines may result in any domestic or foreign tax withholding obligations, whether national, federal, state or local, including any employment tax obligation (the “Tax Withholding Obligation”), Awardee is required to arrange for the satisfaction of the minimum amount of such Tax Withholding Obligations in a manner acceptable to Cardinal Health. Unless Awardee elects to satisfy the Tax Withholding Obligation by an alternative means that is then permitted by Cardinal Health, Cardinal Health shall withhold on Awardee’s behalf the number of New Cardinal Health Restricted Shares when the New Cardinal Health Restricted Shares become vested as Cardinal Health determines to be sufficient to satisfy the Tax Withholding Obligation. In the case of any amounts withheld for taxes pursuant to this provision in the form of Shares, the amount withheld shall not exceed the minimum required by Applicable Law and regulations.

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10. Governing Law/Venue for Dispute Resolution/Costs and Legal Fees . The New Cardinal Health Restricted Shares are governed by the laws of the State of Ohio, without regard to principles of conflicts of law, except to the extent superseded by the laws of the United States of America. Awardee and Cardinal Health agree and acknowledge that the laws of the State of Ohio bear a substantial relationship to the parties and/or this Agreement and that the New Cardinal Health Restricted Shares and benefits granted herein would not be granted without their governance of this Agreement by the laws of the State of Ohio. In addition, all legal actions or proceedings relevant to the New Cardinal Health Restricted Shares will be brought in state or federal courts located in Franklin County, Ohio, and Awardee and Cardinal Health consent to the personal jurisdiction of such courts. Awardee acknowledges that the terms relating to Triggering Conduct, Competitor Triggering Conduct and special forfeiture and repayment rules set forth above are reasonable in nature, are fundamental for the protection of Cardinal Health’s legitimate business and proprietary interests, and do not adversely affect Awardee’s ability to earn a living in any capacity that does not violate such terms. In the event of any violation by Awardee of any such covenants, Cardinal Health will suffer immediate and irreparable injury for which there is no adequate remedy at law. In the event of any violation or attempted violations of these restrictions and covenants, the Cardinal Group will be entitled to specific performance and injunctive relief or other equitable relief, including the issuance ex parte of a temporary restraining order, without any showing of irreparable harm or damage, such irreparable harm being acknowledged and admitted by Awardee, waiving any requirement for the securing or posting of any bond in connection with such remedy, without prejudice to any other rights and remedies afforded the Cardinal Group hereunder or by law. In the event that it becomes necessary for the Cardinal Group to institute legal proceedings under this Agreement, Awardee will be responsible for all costs and reasonable legal fees incurred by Cardinal Health with regard to such proceedings. Any provision of this Agreement which is determined by a court of competent jurisdiction to be invalid or unenforceable should be construed or limited in a manner that is valid and enforceable and that comes closest to the business objectives intended by such provision, without invalidating or rendering unenforceable the remaining provisions of this Agreement.

11. Action by the Administrator . The interpretation of this Agreement shall rest exclusively and completely within the sole discretion of the Administrator. Awardee and Cardinal Health shall be bound by the decisions of the Administrator with regard to the interpretation of this Agreement and with regard to any and all matters set forth in this Agreement. The Administrator may delegate its functions under this Agreement to an officer of the Cardinal Group designated by the Administrator (hereinafter the “designee”). In fulfilling its responsibilities hereunder, the Administrator or its designee may rely upon documents, written statements of the parties or such other material as the Administrator or its designee deems appropriate. Neither Awardee nor Cardinal Health shall have any right to be heard or to appear before the Administrator or its designee and that any decision of the Administrator or its designee relating to this Agreement, including without limitation whether particular conduct constitutes Triggering Conduct or Competitor Triggering Conduct, shall be final and binding unless such decision is arbitrary and capricious.

12. Electronic Delivery and Consent to Electronic Participation . The Company may, in its sole discretion, decide to deliver any documents related to the New Cardinal Health Restricted Shares or future Awards that may be granted under the Plan by electronic means or to request Awardee’s consent to participate in the Plan by electronic means. Awardee hereby consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company, including the acceptance of restricted share grants and the execution of restricted share agreements through electronic signature.

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13. Notices . All notices, requests, consents and other communications required or provided under this Agreement to be delivered by Awardee to Cardinal Health will be in writing and will be deemed sufficient if delivered by hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to Cardinal Health at the address set forth below:

Cardinal Health, Inc.

7000 Cardinal Place

Dublin, Ohio 43017

Attention: General Counsel

Facsimile: 614-757-5051

All notices, requests consents and other communications required or provided under this Agreement to be delivered by Cardinal Health to Awardee may be delivered by e-mail or in writing and will be deemed sufficient if delivered by e-mail, hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to Awardee.

14. Employment Agreement, Offer Letter or Other Arrangement . To the extent a written employment agreement, offer letter or other arrangement (“Employment Arrangement”) that was approved by the Human Resources and Compensation Committee or the Board of Directors or that was approved in writing by an officer of Cardinal Health pursuant to delegated authority of the Human Resources and Compensation Committee provides for greater benefits to Awardee with respect to vesting of the New Cardinal Health Restricted Shares on Termination of Employment than provided in this Agreement or in the Plan, then the terms of such Employment Arrangement with respect to vesting of the New Cardinal Health Restricted Shares on Termination of Employment by reason of such specified events shall supersede the terms hereof to the extent permitted by the terms of the Plan.

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Appendix B

CAREFUSION CORPORATION

RESTRICTED SHARES TERMS AND CONDITIONS

These Restricted Shares Terms and Conditions (the “Terms”) adjust and restate the terms that apply to the Cardinal Health Restricted Shares (as defined below) for purposes of applying such terms to the restricted shares (the “CareFusion Restricted Shares”) granted to Awardee by CareFusion Corporation (the “Company”) under the CareFusion Corporation 2009 Long-Term Incentive Plan (the “Plan”) as a result of the separation of the clinical and medical products businesses of Cardinal Health, Inc. (“Cardinal Health”) by means of a spin-off of at least 80.1% of the outstanding common stock of the Company to Cardinal Health’s shareholders, effective on August 31, 2009 (the “Spin-Off”). These Terms, together with the RSA Terms (as defined below) and the Plan, shall govern the CareFusion Restricted Shares. The CareFusion Restricted Shares are Replacement Awards under the Plan.

The “Number of Shares” that are covered by the CareFusion Restricted Shares constitute the RSA terms (the “RSA Terms”) and can be found on the website of the Company’s third-party equity plan administrator. The extent to which the CareFusion Restricted Shares shall vest on and after specific dates (the “Vesting Date(s)”), subject in each case to the provisions of these Terms, including those relating to Awardee’s continued employment with Cardinal Health and its Affiliates (collectively, the “Cardinal Group”), is the same as set forth in Awardee’s award agreement (the “Cardinal Health Restricted Share Agreement”) for the restricted share awards granted to Awardee by Cardinal Health (the “Cardinal Health Restricted Shares”) on the grant date specified in the Cardinal Health Restricted Share Agreement (the “Pre-Spin Grant Date”).

Capitalized terms used in these Terms which are not specifically defined herein will have the meanings ascribed to such terms in the Plan.

1. Transferability . Prior to the applicable vesting of the CareFusion Restricted Shares, Awardee shall not be permitted to sell, transfer, pledge, assign or otherwise encumber the then unvested CareFusion Restricted Shares, except as otherwise provided in paragraph 2 of these Terms.

2. Termination of Employment .

(a) General . Except as set forth below, if a Termination of Employment occurs prior to the vesting of the CareFusion Restricted Shares, such CareFusion Restricted Shares shall be forfeited by Awardee.

(b) Death or Disability . If a Termination of Employment occurs prior to the vesting in full of the CareFusion Restricted Shares by reason of Awardee’s death or Disability, but at least 6 months from the Pre-Spin Grant Date, then the restrictions with respect to any unvested CareFusion Restricted Shares shall immediately lapse and such CareFusion Restricted Shares shall vest in full and shall not be forfeited.

(c) Retirement . If a Termination of Employment occurs prior to the vesting in full of the CareFusion Restricted Shares by reason of the Awardee’s Retirement, but at least 6 months from the Pre-Spin Grant Date, then a Ratable Portion of each installment of the CareFusion Restricted Shares that would have vested on each future Vesting Date shall immediately vest and not be forfeited. Such Ratable Portion shall, with respect to the applicable installment, be an

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amount equal to such installment of the CareFusion Restricted Shares scheduled to vest on the applicable Vesting Date multiplied by a fraction, the numerator of which shall be the number of days from the Pre-Spin Grant Date through the date of such termination, and the denominator of which shall be the number of days from the Pre-Spin Grant Date through such Vesting Date. For purposes of these Terms and this Award under the Plan, “Retirement” shall refer to Age 55 Retirement, which means Termination of Employment by a Participant (other than by reason of death or Disability and other than in the event of Termination for Cause) from the Cardinal Group (i) after attaining age fifty-five (55), and (ii) having at least ten (10) years of continuous service with the Cardinal Group, including service with an Affiliate of Cardinal Health prior to the time that such Affiliate became an Affiliate of Cardinal Health. For purposes of the age and/or service requirement, the Administrator may, in its discretion, credit a Participant with additional age and/or years of service.

3. Triggering Conduct/Competitor Triggering Conduct .

(a) As used in these Terms, “Triggering Conduct” shall include the following:

(i) for so long as Awardee is an employee of the Cardinal Group and for three (3) years following Termination of Employment, regardless of the reason,

(A) other than in the performance of duties assigned by the Cardinal Group, disclosing or using in any capacity any confidential information, trade secrets or other business sensitive information or material concerning the Cardinal Group;

(B) a violation of policies of the Cardinal Group, including, but not limited to, conduct which would constitute a breach of any certificate of compliance or similar attestation/certification signed by Awardee;

(C) directly or indirectly employing, contacting concerning employment, or participating in any way in the recruitment for employment of (whether as an employee, officer, director, agent, consultant or independent contractor) any person who was or is an employee, representative, officer or director of the Cardinal Group at any time within the 12 months prior to Awardee’s Termination of Employment;

(D) any action by Awardee and/or his or her representatives that either does or could reasonably be expected to undermine, diminish or otherwise damage the relationship between the Cardinal Group and any of its customers, potential customers, vendors and/or suppliers that were known to Awardee; and

(E) breaching any provision of any employment or severance agreement with a member of the Cardinal Group; and

(ii) for three (3) years following the effective time of the Spin-Off,

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(B) other than in the performance of duties assigned by the Cardinal Group, directly or indirectly employing, contacting concerning employment, or participating in any way in the recruitment for employment of (whether as an employee, officer, director, agent, consultant or independent contractor) any person who was or is an employee, representative, officer or director of the CareFusion Group at any time within the 12 months prior to the effective time of the Spin-Off; and

(C) other than in the performance of duties assigned by the Cardinal Group, any action by Awardee and/or his or her representatives that either does or could reasonably be expected to undermine, diminish or otherwise damage the relationship between the CareFusion Group and any of its customers, potential customers, vendors and/or suppliers that were known to Awardee.

For purposes of these Terms, “CareFusion Group” means the Company and any Subsidiary or other entity that is directly or indirectly controlled by the Company or any entity in which the Company has a significant ownership interest as determined by the Administrator.

(b) As used in these Terms, “Competitor Triggering Conduct” shall include:

(i) during Awardee’s employment or within one (1) year following Awardee’s Termination of Employment, accepting employment with, or serving as a consultant or advisor or in any other capacity to, an entity that is in competition with the business conducted by any member of the Cardinal Group (a “ Cardinal Competitor”), including, but not limited to, employment or another business relationship with any Cardinal Competitor if Awardee has been introduced to trade secrets, confidential information or business sensitive information during Awardee’s employment with the Cardinal Group and such information would aid the Cardinal Competitor because the threat of disclosure of such information is so great that, for purposes of these Terms, it must be assumed that such disclosure would occur; and

(ii) within one (1) year following the effective time of the Spin-Off, other than in the performance of duties assigned by the Cardinal Group accepting employment with, or serving as a consultant or advisor or in any other capacity to, an entity that is in competition with the business conducted by any member of the CareFusion Group (a “ CareFusion Competitor”), including, but not limited to, employment or another business relationship with any CareFusion Competitor if Awardee has been introduced to trade secrets, confidential information or business sensitive information during Awardee’s employment with the businesses that comprised the CareFusion Group prior to the effective time of the Spin-Off and such information would aid the CareFusion Competitor because the threat of disclosure of such information is so great that, for purposes of these Terms, it must be assumed that such disclosure would occur.

4. Special Forfeiture/Repayment Rules . Awardee agrees not to engage in Triggering Conduct during the applicable time periods set forth in paragraph 3 hereof. If Awardee engages in Triggering Conduct or Competitor Triggering Conduct during the applicable time periods set forth in paragraph 3, then:

(a) the CareFusion Restricted Shares that have not yet vested shall immediately and automatically terminate, be forfeited, and shall cease to exist; and

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(b) Awardee shall, within thirty (30) days following written notice from the Company, pay to the Company an amount equal to (i) the aggregate gross gain realized or obtained by Awardee resulting from the vesting of all CareFusion Restricted Shares, measured as of the date of vesting ( i.e. , the market value of the CareFusion Restricted Shares on the date of vesting), that have already vested at any time within three (3) years prior to the Triggering Conduct (the “Look-Back Period”), minus (ii) $1.00. If Awardee engages only in Competitor Triggering Conduct, then the Look-Back Period shall be shortened to exclude any period more than one (1) year prior to Awardee’s Termination of Employment (or, in the case of Competitor Triggering Conduct as defined in paragraph 3(b)(ii) above, one (1) year prior to the effective time of the Spin-Off), but include any period between the time of Termination of Employment or the effective time of the Spin-Off, as applicable, and engagement in Competitor Triggering Conduct. Awardee may be released from Awardee’s obligations under this paragraph 4 if and only if the Administrator (or its duly appointed designee) and a duly authorized representative of Cardinal Health determine, in writing and in their sole discretion, that such action is in the best interests of both Cardinal Health and the Company. Nothing in this paragraph 4 constitutes a so-called “noncompete” covenant. This paragraph 4 does, however, prohibit certain conduct while Awardee is associated with either the Cardinal Group or the CareFusion Group and thereafter and does provide for the forfeiture or repayment of the benefits granted by these Terms under certain circumstances, including, but not limited to, Awardee’s acceptance of employment with a Cardinal Competitor or a CareFusion Competitor. Awardee agrees to provide the Company with at least ten (10) days’ written notice prior to directly or indirectly accepting employment with or serving as a consultant or advisor or in any other capacity to a Cardinal Competitor or a CareFusion Competitor, and further agrees to inform any such new employer, before accepting employment, of the terms of this paragraph 4 and Awardee’s continuing obligations contained herein. No provisions of these Terms shall diminish, negate or otherwise impact any separate noncompete or other agreement to which Awardee may be a party, including, but not limited to, any certificate of compliance or similar attestation/certification signed by Awardee; provided , however , that to the extent that any provisions contained in any other agreement are inconsistent in any manner with the restrictions and covenants of Awardee contained in these Terms, the provisions of these Terms shall take precedence and such other inconsistent provisions shall be null and void. Awardee has acknowledged and agreed that these restrictions are for the benefit of Cardinal Health in consideration of Awardee’s receipt of the Cardinal Health Restricted Shares, in consideration of employment, in consideration of exposing Awardee to Cardinal Health’s business operations and confidential information, and for other good and valuable consideration, the adequacy of which consideration is hereby expressly confirmed. Awardee has further acknowledged that the receipt of the Cardinal Health Restricted Shares and the execution of the Cardinal Health Restricted Share Agreements were voluntary actions on the part of Awardee and that Cardinal Health would have been unwilling to provide the Cardinal Health Restricted Shares to Awardee without including the restrictions and covenants of Awardee set forth above. Further, Awardee and Cardinal Health have agreed and acknowledged that the provisions contained in paragraphs 3 and 4 are ancillary to, or part of, an otherwise enforceable agreement at the time the Cardinal Health Restricted Share Agreements were made.

5. Change of Control . Notwithstanding anything herein to the contrary, (a) in the event a Change of Control occurs ( i.e. , a Change of Control occurs with respect to the Company), then the provisions of Section 16(b) of the Plan shall not apply and the CareFusion Restricted Shares shall continue to vest in accordance with the terms set forth herein and (b) in the event a “change of control” (as defined in the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended and restated effective as of November 5, 2008, occurs with respect to Cardinal Health, on the date that such “change of control” occurs, the restrictions applicable to any unvested CareFusion Restricted Shares shall lapse and the Award shall be fully vested.

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6. Right of Set-Off . By having accepted the Cardinal Health Restricted Shares, Awardee has agreed that (a) any amounts Awardee owes from time to time to any member of the Cardinal Group with respect to the CareFusion Restricted Shares may be deducted from, and set-off against, any amounts owed to Awardee by any member of the Cardinal Group from time to time (including, but not limited to, amounts owed to Awardee as wages, severance payments or other fringe benefits) and (b) any amounts Awardee owes from time to time to any member of the CareFusion Group with respect to the CareFusion Restricted Shares may be deducted from, and set-off against, any amounts owed to Awardee by any member of the CareFusion Group from time to time (including, but not limited to, amounts owed to Awardee as wages, severance payments or other fringe benefits).

7. Stockholder Rights and Restrictions . Except with regard to the disposition of the CareFusion Restricted Shares and the receipt of dividends, Awardee will generally have all of the rights of a stockholder with respect to the CareFusion Restricted Shares from the effective time of the Spin-Off, including, without limitation, the right to vote such CareFusion Restricted Shares, but subject to the restrictions set forth in these Terms or in the Plan. Dividends with respect to the CareFusion Restricted Shares shall be accrued until the applicable Vesting Date and paid thereon (subject to the same vesting requirements as the underlying CareFusion Restricted Shares). In addition, if (a) the CareFusion Restricted Shares replace one or more Cardinal Health Restricted Shares that were canceled and (b) Awardee was entitled to one or more cash dividend payments under the Cardinal Health Restricted Shares that had not been paid prior to the effective time of the Spin-Off, then the Company shall pay such cash dividend payments on the Vesting Date. Any additional Shares which Awardee may become entitled to receive by virtue of a merger or reorganization in which the Company is the surviving corporation or any other change in capital structure shall be subject to the same vesting requirements and restrictions set forth above.

8. Withholding Tax .

(a) Generally . Awardee is liable and responsible for all taxes owed in connection with the CareFusion Restricted Shares, regardless of any action the Company or Cardinal Health takes with respect to any tax withholding obligations that arise in connection with the CareFusion Restricted Shares. Neither the Company nor Cardinal Health makes any representation or undertaking regarding the tax treatment or the treatment of any tax withholding in connection with the grant or vesting of the CareFusion Restricted Shares or the subsequent sale of the CareFusion Restricted Shares. The Company does not commit and is under no obligation to structure the CareFusion Restricted Shares to reduce or eliminate Awardee’s tax liability.

(b) Payment of Withholding Taxes . Prior to any event in connection with the CareFusion Restricted Shares ( e.g. , vesting) that the Company or Cardinal Health determines may result in any domestic or foreign tax withholding obligations, whether national, federal, state or local, including any employment tax obligation (the “Tax Withholding Obligation”), Awardee is required to arrange for the satisfaction of the minimum amount of such Tax Withholding Obligations in a manner acceptable to the Company and Cardinal Health. By accepting the grant of Cardinal Health Restricted Shares, Awardee has authorized the Company and Cardinal Health to withhold on Awardee’s behalf the number of CareFusion Restricted Shares when the CareFusion Restricted Shares become vested as the Company determines to be sufficient to satisfy the Tax Withholding Obligation. In the case of any amounts withheld for taxes pursuant to this provision in the form of shares, the amount withheld shall not exceed the minimum required by Applicable Law and regulations.

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9. Governing Law/Venue for Dispute Resolution/Costs and Legal Fees . The CareFusion Restricted Shares are governed by the laws of the State of Ohio, without regard to principles of conflicts of law, except to the extent superseded by the laws of the United States of America. Awardee has agreed that the laws of the State of Ohio bear a substantial relationship to the Cardinal Health Restricted Shares and that the benefits granted therein, and thus the CareFusion Restricted Shares and the benefits granted thereunder, would not be granted without their governance by the laws of the State of Ohio. In addition, all legal actions or proceedings relevant to the CareFusion Restricted Shares will be brought exclusively in state or federal courts located in Franklin County, Ohio, and Awardee has consented to the personal jurisdiction of such courts. Awardee has acknowledged that the terms relating to Triggering Conduct, Competitor Triggering Conduct and special forfeiture and repayment rules set forth above are reasonable in nature, are fundamental for the protection of legitimate business and proprietary interests, and do not adversely affect Awardee’s ability to earn a living in any capacity that does not violate such terms. In the event of any violation by Awardee of any such covenants, immediate and irreparable injury for which there is no adequate remedy at law will result. In the event of any violation or attempted violations of these restrictions and covenants, the Cardinal Group or the CareFusion Group, as the case may be, will be entitled to specific performance and injunctive relief or other equitable relief, including the issuance ex parte of a temporary restraining order, without any showing of irreparable harm or damage, such irreparable harm being acknowledged and admitted by Awardee, waiving any requirement for the securing or posting of any bond in connection with such remedy, without prejudice to any other rights and remedies afforded the Cardinal Group or CareFusion Group, as the case may be, hereunder or by law. In the event that it becomes necessary for the Cardinal Group or CareFusion Group to institute legal proceedings under Awardee’s CareFusion Restricted Shares, Awardee will be responsible for all costs and reasonable legal fees with regard to such proceedings. Any term relating to the CareFusion Restricted Shares which is determined by a court of competent jurisdiction to be invalid or unenforceable should be construed or limited in a manner that is valid and enforceable and that comes closest to the business objectives intended by such term, without invalidating or rendering unenforceable the remaining terms.

10. Action by the Administrator . The interpretation of these Terms shall rest exclusively and completely within the sole discretion of the Administrator. Awardee shall be bound by the decisions of the Administrator with regard to the interpretation of these Terms and with regard to any and all matters set forth in these Terms. The Administrator may delegate its functions under these Terms to an officer of the CareFusion Group designated by the Administrator (hereinafter the “designee”). In fulfilling its responsibilities hereunder, the Administrator or its designee may rely upon documents, written statements of the parties or such other material as the Administrator or its designee deems appropriate. Awardee shall not have any right to be heard or to appear before the Administrator or its designee and any decision of the Administrator or its designee relating to these Terms, including without limitation whether particular conduct constitutes Triggering Conduct or Competitor Triggering Conduct, shall be final and binding unless such decision is arbitrary and capricious.

11. Electronic Delivery and Consent to Electronic Participation . The Company may, in its sole discretion, decide to deliver any documents related to the CareFusion Restricted Shares or future Awards that may be granted under the Plan by electronic means. Awardee has consented to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company, including the acceptance of restricted share grants and the execution of restricted share agreements through electronic signature.

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12. Notices . All notices, requests, consents and other communications by Awardee to the Company with respect to the CareFusion Restricted Shares are to be delivered to the Company in writing and will be deemed sufficient if delivered by hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to the Company at the address set forth below:

CareFusion Corporation

3750 Torrey View Court

San Diego, CA 92130

Attention: Compensation and Benefits Administrator

Facsimile: 858-617-2300

All notices, requests consents and other communications by the Company to Awardee with respect to the CareFusion Restricted Shares to be delivered to Awardee may be delivered by e-mail or in writing and will be deemed sufficient if delivered by e-mail, hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to Awardee.

14. Employment Agreement, Offer Letter or Other Arrangement . To the extent a written employment agreement, offer letter or other arrangement (“Employment Arrangement”) that, (a) prior to the effective time of the Spin-Off, (i) was approved by the Human Resources and Compensation Committee of Cardinal Health or the Board of Directors of Cardinal Health or (ii) was approved in writing by an officer of Cardinal Health pursuant to delegated authority of the Human Resources and Compensation Committee of Cardinal Health or (b)(i) was approved by the Human Resources and Compensation Committee of the Company or the Board or (ii) was approved in writing by an officer of the Company pursuant to delegated authority of the Human Resources and Compensation Committee of the Company, provides for greater benefits to Awardee, with respect to vesting of all or a portion of the Cardinal Health Restricted Shares or CareFusion Restricted Shares on Termination of Employment than provided in these Terms or in the Plan, then the terms of such Employment Arrangement with respect to vesting on Termination of Employment by reason of such specified events shall supersede the terms hereof in respect of all or a comparable portion of the CareFusion Restricted Shares to the extent permitted by the terms of the Plan.

Exhibit 10.5.4

S TOCK O PTIONS

(N ON -E MPLOYEE D IRECTORS (C URRENT AND F ORMER ))

A DJUSTMENTS TO C ARDINAL H EALTH S TOCK O PTIONS AND T ERMS OF C ARE F USION S TOCK O PTIONS

August 31, 2009

As a result of the separation of the clinical and medical products businesses of Cardinal Health, Inc. (“ Cardinal Health ”) by means of a spin-off of those businesses to Cardinal Health’s shareholders, effective August 31, 2009 (the “ Spin-Off ”), outstanding stock option awards granted by Cardinal Health to you (the “ Cardinal Health Options ”) pursuant to the terms of equity incentive plans adopted by Cardinal Health (“ Cardinal Health Equity Plans ”) and related grant agreements (the “ Cardinal Option Agreements ”) are being adjusted, as of the effective time of the Spin-Off, as follows:

•

With respect to each outstanding Cardinal Health Option initially granted to you on or prior to September 26, 2007 (each, a “ Pre-2007 Cardinal Option ”), (i) the exercise price and number of shares subject to such option are being adjusted (each, an “ Adjusted Pre-2007 Cardinal Option ”) and (ii) you are receiving a nonqualified stock option to purchase common stock of CareFusion Corporation (each, a “ CareFusion Option ”).

•

With respect to each outstanding Cardinal Health Option initially granted to you after September 26, 2007 (each, a “ Post-2007 Cardinal Option ”):

•

If you are a non-employee director of Cardinal Health prior to the effective time of the Spin-Off who is not a member of the Board of Directors of CareFusion Corporation on August 31, 2009, the exercise price and number of shares subject to your Post-2007 Cardinal Options are being adjusted (each, an “ Adjusted Post-2007 Cardinal Option ”); and

•

If you are a non-employee director of Cardinal Health prior to the effective time of the Spin-Off who is a member of the Board of Directors of CareFusion Corporation on August 31, 2009, your Post-2007 Cardinal Options will be cancelled and CareFusion Options will be issued.

Adjusted Pre-2007 Cardinal Options and Adjusted Post-2007 Cardinal Options

Except for the adjusted exercise price and number of shares subject to each Pre-2007 Cardinal Option and Post-2007 Cardinal Option, your Adjusted Pre-2007 Cardinal Options and Adjusted Post-2007 Cardinal Options will continue to be governed by (i) your Cardinal Option Agreements, as amended (including the provisions in the agreements relating to “Triggering Conduct/Competitor Triggering Conduct” and “Special Forfeiture/Repayment Rules”) and (ii) the Cardinal Health Equity Plan under which the agreement was issued, also as amended. Therefore, among other terms, the extent to which each Adjusted Pre-2007 Cardinal Option and Adjusted Post-2007 Cardinal Option will vest and become exercisable on and after specific dates and the date on which such options will expire will be the same as those set forth in your Cardinal Option Agreements.

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The adjusted exercise price and number of shares subject to each Adjusted Pre-2007 Cardinal Option and Adjusted Post-2007 Cardinal Option can be found on the website of Cardinal Health’s third-party equity plan administrator.

Please note that CareFusion Corporation (“ CareFusion ”) and its affiliates are third party beneficiaries of all rights that benefit CareFusion with respect to your Adjusted Pre-2007 Cardinal Options and Adjusted Post-2007 Cardinal Options and as a result CareFusion may enforce with full force and effect all terms and conditions that benefit CareFusion with respect to such options.

CareFusion Options

Your CareFusion Options are granted under, and subject to, the terms and conditions of the CareFusion Corporation 2009 Long-Term Incentive Plan. They are also subject to the terms of the Cardinal Option Agreement for the corresponding Cardinal Health Option (including provisions regarding “Triggering Conduct/Competitor Triggering Conduct” and “Special Forfeiture/Repayment Rules”) and the applicable Cardinal Health Equity Plan, which have been adjusted and restated on Appendix A attached hereto for purposes of applying them to your CareFusion Options and have been approved by the Human Resources and Compensation Committees of Cardinal Health and CareFusion. Please note that Cardinal Health and its affiliates are third party beneficiaries of all rights that benefit Cardinal Health with respect to your CareFusion Options and as a result Cardinal Health may enforce with full force and effect all terms and conditions that benefit Cardinal Health with respect to such options.

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Appendix A

CAREFUSION CORPORATION

NONQUALIFIED STOCK OPTION TERMS AND CONDITIONS

These Nonqualified Stock Option Terms and Conditions (the “Terms”) adjust and restate the terms that apply to the Cardinal Health Options (as defined below) for purposes of applying such terms to the nonqualified stock options (the “CareFusion Options”) granted to Awardee by CareFusion Corporation (the “Company”) under the CareFusion Corporation 2009 Long-Term Incentive Plan (the “Plan”) as a result of the separation of the clinical and medical products businesses of Cardinal Health, Inc. (“Cardinal Health”) by means of a spin-off of at least 80.1% of the outstanding common stock of the Company to Cardinal Health’s shareholders, effective on August 31, 2009 (the “Spin-Off”). These Terms, together with the Option Terms (as defined below) and the Plan, shall govern the CareFusion Options. The CareFusion Options are Replacement Awards under the Plan.

The “Number of Shares” that are covered by the CareFusion Options and the “Exercise Price per Share” of the CareFusion Options constitute the option terms (the “Option Terms”) and can be found on the website of the Company’s third-party equity plan administrator. The extent to which the CareFusion Options shall vest and become exercisable on and after specific dates (the “Vesting Date(s)”), subject in each case to the provisions of these Terms, including those relating to Awardee’s continued service with Cardinal Health and its Affiliates (collectively, the “Cardinal Group”) and the date on which the CareFusion Options shall expire (the “Grant Expiration Date”) are the same terms as those set forth in Awardee’s stock option agreement(s) (each, a “Cardinal Option Agreement”) for stock option awards granted to Awardee by Cardinal Health (the “Cardinal Health Options”) on the grant date specified in the agreement for such Cardinal Health Options (the “Pre-Spin Grant Date”).

Capitalized terms used in these Terms which are not specifically defined herein will have the meanings ascribed to such terms in the Plan.

1. Method of Exercise and Payment of Price .

(a) Method of Exercise . At any time when all or a portion of the CareFusion Options is exercisable under the Plan and these Terms, some or all of the exercisable portion of the CareFusion Options may be exercised from time to time by written notice to the Company, or such other method of exercise as may be specified by the Company, including, without limitation, exercise by electronic means on the website of the Company’s third-party equity plan administrator, which will:

(i) state the number of whole Shares with respect to which the CareFusion Options are being exercised; and

(ii) if the CareFusion Options are being exercised by anyone other than Awardee, if not already provided, be accompanied by proof satisfactory to counsel for the Company of the right of such person or persons to exercise the CareFusion Options under the Plan and all Applicable Laws and regulations.

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(b) Payment of Price . The full exercise price for the portion of the CareFusion Options being exercised shall be paid to the Company as provided below:

(i) in cash;

(ii) by check or wire transfer (denominated in U.S. Dollars);

(iii) subject to any conditions or limitations established by the Administrator, other Shares which (A) in the case of Shares acquired from the Company (whether upon the exercise of the CareFusion Options or otherwise), have been owned by the Participant for more than six (6) months on the date of surrender (unless this condition is waived by the Administrator), and (B) have a Fair Market Value on the date of surrender equal to or greater than the aggregate exercise price of the Shares as to which said CareFusion Options shall be exercised (it being agreed that the excess of the Fair Market Value over the aggregate exercise price shall be refunded to Awardee, with any fractional Share being repaid in cash);

(iv) consideration received by the Company under a broker-assisted sale and remittance program acceptable to the Administrator; or

(v) any combination of the foregoing methods of payment.

2. Transferability . The CareFusion Options shall be transferable (I) at Awardee’s death, by Awardee by will or pursuant to the laws of descent and distribution, and (II) by Awardee during Awardee’s lifetime, without payment of consideration, to (a) the spouse, former spouse, parents, stepparents, grandparents, parents-in-law, siblings, siblings-in-law, children, stepchildren, children-in-law, grandchildren, nieces or nephews of Awardee, or any other persons sharing Awardee’s household (other than tenants or employees) (collectively, “Family Members”), (b) a trust or trusts for the primary benefit of Awardee or such Family Members, (c) a foundation in which Awardee or such Family Members control the management of assets, or (d) a partnership in which Awardee or such Family Members are the majority or controlling partners; provided , however , that subsequent transfers of the transferred CareFusion Options shall be prohibited, except (X) if the transferee is an individual, at the transferee’s death by the transferee by will or pursuant to the laws of descent and distribution, and (Y) without payment of consideration to the individuals or entities listed in subparagraphs II(a), (b) or (c), above, with respect to the original Awardee. The Administrator may, in its discretion, permit transfers to other persons and entities as permitted by the Plan. Neither a transfer under a domestic relations order in settlement of marital property rights nor a transfer to an entity in which more than 50% of the voting interests are owned by Awardee or Family Members in exchange for an interest in that entity shall be considered to be a transfer for consideration. Within ten (10) days of any transfer, Awardee shall notify the Compensation and Benefits department of the Company in writing of the transfer. Following transfer, the CareFusion Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer and, except as otherwise provided in the Plan or these Terms, references to the original Awardee shall be deemed to refer to the transferee. The effects of Awardee’s termination of service on the Cardinal Board (as defined below) provided in paragraph 3 hereof shall continue to be applied with respect to the original Awardee, following which the CareFusion Options shall be exercisable by the transferee only to the extent, and for the periods, specified in paragraph 3. The Company shall have no obligation to notify any transferee of Awardee’s termination of service on the Cardinal Board for any reason. The conduct prohibited of Awardee in paragraphs 5 and 6 hereof shall continue to be prohibited of Awardee following transfer to the same extent as

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immediately prior to transfer and the CareFusion Options (or its economic value, as applicable) shall be subject to forfeiture by the transferee and recoupment from Awardee to the same extent as would have been the case of Awardee had the CareFusion Options not been transferred. Awardee shall remain subject to the recoupment provisions of paragraphs 5 and 6 of these Terms following transfer of the CareFusion Options.

3. Termination of Service on the Board .

(a) Termination of Service by Death . If Awardee ceases to be a member of the Board of Directors of Cardinal Health (the “Cardinal Board”, and each such member, a “Cardinal Director”) by reason of Awardee’s death, any unvested portion of the CareFusion Options shall vest upon and become exercisable in full from and after Awardee’s death. The CareFusion Options may thereafter be exercised by any transferee of Awardee, if applicable, or by the legal representative of the estate or legatee of Awardee under the will of Awardee until the Grant Expiration Date.

(b) Other Termination of Service . If Awardee ceases to be a Cardinal Director for any reason other than death, any unexercised portion of the CareFusion Options which has not vested on such date of termination of service on the Cardinal Board shall automatically terminate on the date of such termination of service. Any unexercised portion of the CareFusion Options which otherwise is exercisable by Awardee (or any transferee) shall remain exercisable until the Grant Expiration Date; provided , however , that upon the removal of Awardee from the Cardinal Board for cause, other than upon or after a “change of control” (as defined in the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended and restated effective as of November 5, 2008), the CareFusion Options (whether then held by Awardee or any transferee) shall immediately lapse and be of no further force or effect.

4. Restrictions on Exercise . The CareFusion Options are subject to all restrictions in these Terms and/or in the Plan. As a condition of any exercise of the CareFusion Options, the Company may require Awardee or his or her transferee or successor to make any representation and warranty to comply with any Applicable Law or regulation or to confirm any factual matters (including Awardee’s compliance with the terms of paragraphs 5 and 6 of these Terms) reasonably requested by the Company. The CareFusion Options shall not be exercisable if such exercise would involve a violation of any Applicable Law.

5. Triggering Conduct/Competitor Triggering Conduct . As used in these Terms, “Triggering Conduct” shall include (i) disclosing or using in any capacity other than as necessary in the performance of duties as a Cardinal Director any confidential information, trade secrets or other business sensitive information or material concerning the Company or its subsidiaries the Cardinal Group; (ii) violating any policy of the Cardinal Group, including, but not limited to, conduct which would constitute a breach of any certificate of compliance or similar attestation/certification signed by Awardee; (iii) directly or indirectly employing, contacting concerning employment, or participating in any way in the recruitment for employment of (whether as an employee, officer, director, agent, consultant or independent contractor), any person who was or is an employee, representative, officer, or director of any entity in the Cardinal Group at any time within the twelve (12) months prior to the termination of service on the Cardinal Board; (iv) any action by Awardee and/or Awardee’s representatives that either does or could reasonably be expected to undermine, diminish or otherwise damage the relationship between the Cardinal Group and any of its customers, potential customers, vendors and/or suppliers that were known to Awardee; and (v) breaching any provision of any benefit or severance agreement with a member of the Cardinal Group. As used herein, “Competitor

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Triggering Conduct” shall include, either during Awardee’s service as a Cardinal Director or within one year following Awardee’s termination of service on the Cardinal Board, accepting employment with or serving as a consultant, advisor, or any other capacity to an entity that is in competition with the business conducted by any member of the Cardinal Group (a “Competitor”) including, but not limited to, employment or another business relationship with any Competitor if Awardee has been introduced to trade secrets, confidential information or business sensitive information during Awardee’s service as a Cardinal Director and such information would aid the Competitor because the threat of disclosure of such information is so great that, for purposes of these Terms, it must be assumed that such disclosure would occur. For purposes of these Terms, the nature and extent of Awardee’s activities, if any, disclosed to and reviewed by the Audit Committee or Nominating and Governance Committee of the Cardinal Board (each, the “Specified Committee”) prior to the date of Awardee’s termination of service on the Cardinal Board shall not, unless specified to the contrary by the Specified Committee in a written notice given to Awardee, be deemed to be Competitor Triggering Conduct. The Human Resources and Compensation Committee of the Cardinal Board (the “Cardinal Compensation Committee”) shall resolve in good faith any disputes concerning whether particular conduct constitutes Triggering Conduct or Competitor Triggering Conduct, and any such determination by the Cardinal Compensation Committee shall be conclusive and binding on all interested persons.

6. Special Forfeiture/Repayment Rules . For so long as Awardee continues as a Cardinal Director and for three years following Awardee’s termination of service on the Cardinal Board regardless of the reason, Awardee agrees not to engage in Triggering Conduct. If Awardee engages in Triggering Conduct during the time period set forth in the preceding sentence or Competitor Triggering Conduct during the applicable time periods set forth in paragraph 5, then:

(a) the CareFusion Options (or any part thereof that has not been exercised) shall immediately and automatically terminate, be forfeited, and shall cease to be exercisable at any time; and

(b) Awardee shall, within thirty (30) days following written notice from the Company, pay the Company an amount equal to the gross option gain realized or obtained by Awardee or any transferee resulting from the exercise of such CareFusion Options, measured at the date of exercise ( i.e. , the difference between the market value of the Shares underlying the CareFusion Options on the exercise date and the exercise price paid for such Shares underlying the CareFusion Options), with respect to any portion of the CareFusion Options that has already been exercised at any time within three (3) years prior to the Triggering Conduct (the “Look-Back Period”), less $1.00. If Awardee engages only in Competitor Triggering Conduct, then the Look-Back Period shall be shortened to exclude any period more than one (1) year prior to Awardee’s termination of service on the Cardinal Board, but include any period between the time of Awardee’s termination of service on the Cardinal Board and the time Awardee engaged in Competitor Triggering Conduct. Awardee may be released from Awardee’s obligations under this paragraph 6 if and only if the Cardinal Compensation Committee determines, in writing and in its sole discretion, that such action is in the best interests of Cardinal Health. Nothing in this paragraph 6 constitutes a so-called “noncompete” covenant. This paragraph 6 does, however, prohibit certain conduct while Awardee is associated with the Cardinal Group and thereafter and does provide for the forfeiture or repayment of the benefits granted by these Terms under certain circumstances, including, but not limited to, Awardee’s acceptance of employment with a Competitor. Awardee agrees to provide Cardinal Health with at least ten (10) days’ written notice prior to directly or indirectly accepting employment with or serving as a consultant or advisor or in any other capacity to a Competitor, and further agrees to inform any such new employer, before accepting employment, of the terms of this paragraph 6 and Awardee’s

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continuing obligations contained herein. No provisions of these Terms shall diminish, negate or otherwise impact any separate noncompete or other agreement to which Awardee may be a party, including, but not limited to, any certificate of compliance or similar attestation/certification signed by Awardee; provided , however , that to the extent that any provisions contained in any other agreement are inconsistent in any manner with the restrictions and covenants of Awardee contained in these Terms, the provisions of these Terms shall take precedence and such other inconsistent provisions shall be null and void. Awardee has acknowledged and agreed that these restrictions are for the benefit of Cardinal Health in consideration of Awardee’s receipt of the Cardinal Health Options, in consideration of exposing Awardee to Cardinal Health’s business operations and confidential information, and for other good and valuable consideration, the adequacy of which consideration is hereby expressly confirmed. Awardee has further acknowledged that the receipt of the Cardinal Health Options and the execution of the Cardinal Option Agreement were voluntary actions on the part of Awardee and that Cardinal Health would have been unwilling to provide the Cardinal Health Options to Awardee without including the restrictions and covenants of Awardee set forth above. Further, Awardee and Cardinal Health have agreed and acknowledged that the provisions contained in paragraphs 5 and 6 are ancillary to, or part of, an otherwise enforceable agreement at the time the Cardinal Option Agreement was made.

7. Change of Control . Notwithstanding anything herein to the contrary, (a) in the event a Change of Control occurs ( i.e. , a Change of Control occurs with respect to the Company), then the provisions of Section 16(b) of the Plan shall not apply and the CareFusion Options shall continue to vest and become exercisable in accordance with the terms set forth herein, and (b) on the date that a “change of control” (as defined in the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended and restated effective as of November 5, 2008) occurs with respect to Cardinal Health, any unvested CareFusion Options shall vest in full.

8. Right of Set-Off . By having accepted the Cardinal Health Options, Awardee has agreed that, so long as the amounts are not treated as “non-qualified deferred compensation” under Section 409A of the Internal Revenue Code of 1986, as amended, (a) any amounts Awardee owes from time to time to any member of the Cardinal Group with respect to the CareFusion Options may be deducted from, and set-off against, any amounts owed to Awardee by any member of the Cardinal Group from time to time (including, but not limited to, amounts owed to Awardee as director annual retainer fees, meetings fees or fringe benefits) and (b) any amounts Awardee owes from time to time to the Company or any of its Affiliates (the “CareFusion Group” with respect to the CareFusion Options may be deducted from, and set-off against, any amounts owed to Awardee by any member of the CareFusion Group from time to time (including, but not limited to, amounts owed to Awardee as director annual retainer fees, meetings fees or fringe benefits).

9. Governing Law/Venue for Dispute Resolution/Costs and Legal Fees . The CareFusion Options are governed by the laws of the State of Ohio, without regard to principles of conflicts of law, except to the extent superseded by the laws of the United States of America. Awardee has agreed that the laws of the State of Ohio bear a substantial relationship to the Cardinal Health Options and that the benefits granted therein, and thus the CareFusion Options and the benefits granted thereunder, would not be granted without their governance by the laws of the State of Ohio. In addition, all legal actions or proceedings relevant to the CareFusion Options will be brought exclusively in state or federal courts located in Franklin County, Ohio, and Awardee has consented to the personal jurisdiction of such courts. Awardee has acknowledged that the terms relating to Triggering Conduct, Competitor Triggering Conduct and special forfeiture and repayment rules set forth above are

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reasonable in nature, are fundamental for the protection of legitimate business and proprietary interests, and do not adversely affect Awardee’s ability to earn a living in any capacity that does not violate such terms. In the event of any violation by Awardee of any such covenants, immediate and irreparable injury for which there is no adequate remedy at law will result. In the event of any violation or attempted violations of these restrictions and covenants, the Cardinal Group will be entitled to specific performance and injunctive relief or other equitable relief, including the issuance ex parte of a temporary restraining order, without any showing of irreparable harm or damage, such irreparable harm being acknowledged and admitted by Awardee, waiving any requirement for the securing or posting of any bond in connection with such remedy, without prejudice to any other rights and remedies afforded the Cardinal Group hereunder or by law. In the event that it becomes necessary for the Cardinal Group to institute legal proceedings under Awardee’s CareFusion Options, Awardee will be responsible for all costs and reasonable legal fees with regard to such proceedings. Any term relating to the CareFusion Options which is determined by a court of competent jurisdiction to be invalid or unenforceable should be construed or limited in a manner that is valid and enforceable and that comes closest to the business objectives intended by such term, without invalidating or rendering unenforceable the remaining terms.

10. Action by the Administrator . Except as set forth above with respect to Triggering Conduct or Competitor Triggering Conduct, the interpretation of these Terms shall rest exclusively and completely within the sole discretion of the Administrator. Awardee shall be bound by the decisions of the Administrator with regard to the interpretation of these Terms and with regard to any and all matters set forth in these Terms. The Administrator may delegate its functions under these Terms to an officer of the CareFusion Group designated by the Administrator (hereinafter the “designee”). In fulfilling its responsibilities hereunder, the Administrator or its designee may rely upon documents, written statements of the parties or such other material as the Administrator or its designee deems appropriate.

11. Electronic Delivery and Consent to Electronic Participation . The Company may, in its sole discretion, decide to deliver any documents related to the CareFusion Options or future options that may be granted under the Plan by electronic means. Awardee has consented to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company, including the acceptance of option grants and the execution of option agreements through electronic signature.

12. Notices . All notices, requests, consents and other communications by Awardee to the Company or Cardinal Health with respect to the CareFusion Options are to be delivered in writing and will be deemed sufficient if delivered by hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to the Company or Cardinal Health, as the case may be, at the address set forth below:

CareFusion Corporation

3750 Torrey View Court

San Diego, CA 92130

Attention: Compensation and Benefits Administrator

Facsimile: 858-617-2300

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Cardinal Health, Inc.

7000 Cardinal Place

Dublin, Ohio 43017

Attention: Chief Legal Officer

Facsimile: 614-757-2797

All notices, requests consents and other communications by the Company to Awardee with respect to the CareFusion Options to be delivered to Awardee may be delivered by e-mail or in writing and will be deemed sufficient if delivered by e-mail, hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to Awardee.

Exhibit 10.5.5

RSU S

(N ON -E MPLOYEE D IRECTORS (C URRENT AND F ORMER ))

A DJUSTMENTS TO C ARDINAL H EALTH R ESTRICTED S HARE U NITS AND T ERMS OF

C ARE F USION R ESTRICTED S HARE U NITS

August 31, 2009

As a result of the separation of the clinical and medical products businesses of Cardinal Health, Inc. (“ Cardinal Health ”) by means of a spin-off of those businesses to Cardinal Health’s shareholders, effective August 31, 2009 (the “ Spin-Off ”), outstanding restricted share unit awards granted by Cardinal Health to you (the “ Cardinal Health RSUs ”) pursuant to the terms of equity incentive plans adopted by Cardinal Health (“ Cardinal Health Equity Plans ”), and related grant agreements (the “ Cardinal Health RSU Agreements ”) are being adjusted, as of the effective time of the Spin-Off, as follows:

•

With respect to each outstanding Cardinal Health RSU initially granted to you on or prior to September 26, 2007 (each, a “ Pre-2007 Cardinal RSU ”), you are receiving a restricted share unit representing the right to receive 0.5 shares of common stock of CareFusion Corporation (each, a “ CareFusion RSU ”) for each Cardinal Health common share that you have the right to receive under a Pre-2007 Cardinal RSU.

•

With respect to each outstanding Cardinal Health RSU initially granted to you after September 26, 2007 (each, a “ Post-2007 Cardinal RSU ”):

•

If you are a non-employee director of Cardinal Health prior to the effective time of the Spin-Off who is not a member of the Board of Directors of CareFusion Corporation on August 31, 2009, the number of shares subject to your Post-2007 Cardinal RSUs is being adjusted (each, an “ Adjusted Post-2007 Cardinal RSU ”); and

•

If you are a non-employee director of Cardinal Health prior to the effective time of the Spin-Off who is a member of the Board of Directors of CareFusion Corporation on August 31, 2009, your Post-2007 Cardinal RSUs will be cancelled and CareFusion RSUs will be issued.

Pre-2007 Cardinal RSUs and Adjusted Post-2007 Cardinal RSUs

Except for the adjusted number of shares subject to each Adjusted Post-2007 Cardinal RSU, your Pre-2007 Cardinal RSUs and Adjusted Post-2007 Cardinal RSUs will continue to be governed by (i) your Cardinal Health RSU Agreements, as amended (including the provisions in the agreements relating to “Triggering Conduct/Competitor Triggering Conduct” and “Special Forfeiture/Repayment Rules”) and (ii) the Cardinal Health Equity Plans. Therefore, among other terms, the extent to which each Pre-2007 Cardinal RSU and Adjusted Post-2007 Cardinal RSU will vest on and after specific dates will be the same as those set forth in your Cardinal Health RSU Agreements.

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The adjusted number of shares subject to each Adjusted Post-2007 Cardinal RSU can be found on the website of Cardinal Health’s third-party equity plan administrator.

Please note that CareFusion Corporation (“ CareFusion ”) and its affiliates are third party beneficiaries of all rights that benefit CareFusion with respect to your Pre-2007 Cardinal RSUs and Adjusted Post-2007 Cardinal RSUs and as a result CareFusion may enforce with full force and effect all terms and conditions that benefit CareFusion with respect to such RSUs.

CareFusion RSUs

Your CareFusion RSUs are granted under, and subject to, the terms and conditions of the CareFusion Corporation 2009 Long-Term Incentive Plan. They are also subject to the terms of the Cardinal Health RSU Agreement for the corresponding Cardinal Health RSU (including paragraphs 3 and 4 of the agreement regarding “Triggering Conduct/Competitor Triggering Conduct” and “Special Forfeiture/Repayment Rules”) and the applicable Cardinal Health Equity Plan, which have been adjusted and restated on Appendix A attached hereto for purposes of applying them to your CareFusion RSUs and have been approved by the Human Resources and Compensation Committees of Cardinal Health and CareFusion. Please note that Cardinal Health and its affiliates are third party beneficiaries of all rights that benefit Cardinal Health with respect to your CareFusion RSUs and as a result Cardinal Health may enforce with full force and effect all terms and conditions that benefit Cardinal Health with respect to such RSUs.

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Appendix A

CAREFUSION CORPORATION

RESTRICTED SHARE UNITS TERMS AND CONDITIONS

These Restricted Share Units Terms and Conditions (the “Terms”) adjust and restate the terms that apply to the Cardinal Health RSUs (as defined below) for purposes of applying such terms to the restricted share units (the “CareFusion RSUs”) granted to Awardee by CareFusion Corporation (the “Company”) under the CareFusion Corporation 2009 Long-Term Incentive Plan (the “Plan”) as a result of the separation of the clinical and medical products businesses of Cardinal Health, Inc. (“Cardinal Health”) by means of a spin-off of at least 80.1% of the outstanding common stock of the Company to Cardinal Health’s shareholders, effective on August 31, 2009 (the “Spin-Off”). These Terms, together with the RSU Terms (as defined below) and the Plan, shall govern the CareFusion RSUs. The CareFusion RSUs are Replacement Awards under the Plan.

The “Number of Shares” that are covered by the CareFusion RSUs constitute the RSU terms (the “RSU Terms”) and can be found on the website of the Company’s third-party equity plan administrator. The extent to which the CareFusion RSUs shall vest on and after specific dates (the “Vesting Date(s)”), subject in each case to the provisions of these Terms, including those relating to Awardee’s continued service with Cardinal Health and its Affiliates (collectively, the “Cardinal Group”), is the same as set forth in Awardee’s award agreement (the “Cardinal Health RSU Agreement”) for the restricted share units granted to Awardee by Cardinal Health (the “Cardinal Health RSUs”) on the grant date specified in the Cardinal Health RSU Agreement (the “Pre-Spin Grant Date”).

Capitalized terms used in these Terms which are not specifically defined herein will have the meanings ascribed to such terms in the Plan.

1. Transferability . The CareFusion RSUs shall not be transferable.

2. Termination of Service on the Board . If Awardee ceases to be a member of the Board of Directors of Cardinal Health (the “Cardinal Board”, and each such member, a “Cardinal Director”) prior to the vesting in full of the CareFusion RSUs for any reason other than Awardee’s death, all of the then unvested CareFusion RSUs shall be forfeited by Awardee. If Awardee ceases to be a member of the Cardinal Board prior to the vesting of the CareFusion RSUs by reason of Awardee’s death, then such CareFusion RSUs shall immediately vest in full and not be forfeited.

3. Triggering Conduct/Competitor Triggering Conduct . As used in these Terms, “Triggering Conduct” shall include (i) disclosing or using in any capacity other than as necessary in the performance of duties as a Cardinal Director any confidential information, trade secrets or other business sensitive information or material concerning the Cardinal Group; (ii) violating any policy of the Cardinal Group, including, but not limited to, conduct which would constitute a breach of any certificate of compliance or similar attestation/certification signed by Awardee; (iii) directly or indirectly employing, contacting concerning employment, or participating in any way in the recruitment for employment of (whether as an employee, officer, director, agent, consultant or independent contractor), any person who was or is an employee, representative, officer, or director of any entity in the Cardinal Group at any time within the twelve (12) months

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prior to the termination of service on the Cardinal Board; (iv) any action by Awardee and/or Awardee’s representatives that either does or could reasonably be expected to undermine, diminish or otherwise damage the relationship between the Cardinal Group and any of its customers, potential customers, vendors and/or suppliers that were known to Awardee; and (v) breaching any provision of any benefit or severance agreement with a member of the Cardinal Group. As used herein, “Competitor Triggering Conduct” shall include, either during Awardee’s service as a Cardinal Director or within one year following Awardee’s termination of service on the Cardinal Board, accepting employment with or serving as a consultant, advisor, or any other capacity to an entity that is in competition with the business conducted by any member of the Cardinal Group (a “Competitor”) including, but not limited to, employment or another business relationship with any Competitor if Awardee has been introduced to trade secrets, confidential information or business sensitive information during Awardee’s service as a Cardinal Director and such information would aid the Competitor because the threat of disclosure of such information is so great that, for purposes of these Terms, it must be assumed that such disclosure would occur. For purposes of these Terms, the nature and extent of Awardee’s activities, if any, disclosed to and reviewed by the Audit Committee or Nominating and Governance Committee of the Cardinal Board (each, the “Specified Committee”) prior to the date of Awardee’s termination of service on the Cardinal Board shall not, unless specified to the contrary by the Specified Committee in a written notice given to Awardee, be deemed to be Competitor Triggering Conduct. The Human Resources and Compensation Committee of the Cardinal Board (the “Cardinal Compensation Committee”) shall resolve in good faith any disputes concerning whether particular conduct constitutes Triggering Conduct or Competitor Triggering Conduct, and any such determination by the Cardinal Compensation Committee shall be conclusive and binding on all interested persons.

4. Special Forfeiture/Repayment Rules . For so long as Awardee continues as a Cardinal Director and for three years following Awardee’s termination of service on the Cardinal Board regardless of the reason, Awardee agrees not to engage in Triggering Conduct. If Awardee engages in Triggering Conduct during the time period set forth in the preceding sentence or Competitor Triggering Conduct during the applicable time periods set forth in paragraph 3, then:

(a) the CareFusion RSUs that have not yet vested or that vested within the Look-Back Period (as defined below) with respect to such Triggering Conduct or Competitor Triggering Conduct and have not yet been settled by a payment pursuant to paragraph 6 hereof shall immediately and automatically terminate, be forfeited, and shall cease to exist; and

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or repayment of the benefits granted by these Terms under certain circumstances, including, but not limited to, Awardee’s acceptance of employment with a Competitor. Awardee agrees to provide Cardinal Health with at least ten (10) days’ written notice prior to directly or indirectly accepting employment with or serving as a consultant or advisor or in any other capacity to a Competitor, and further agrees to inform any such new employer, before accepting employment, of the terms of this paragraph 4 and Awardee’s continuing obligations contained herein. No provisions of these Terms shall diminish, negate or otherwise impact any separate noncompete or other agreement to which Awardee may be a party, including, but not limited to, any certificate of compliance or similar attestation/certification signed by Awardee; provided , however , that to the extent that any provisions contained in any other agreement are inconsistent in any manner with the restrictions and covenants of Awardee contained in these Terms, the provisions of these Terms shall take precedence and such other inconsistent provisions shall be null and void. Awardee has acknowledged and agreed that these restrictions are for the benefit of Cardinal Health in consideration of Awardee’s receipt of the Cardinal Health RSUs, in consideration of exposing Awardee to Cardinal Health’s business operations and confidential information, and for other good and valuable consideration, the adequacy of which consideration is hereby expressly confirmed. Awardee has further acknowledged that the receipt of the Cardinal Health RSUs and the execution of the Cardinal Health RSU Agreements were voluntary actions on the part of Awardee and that Cardinal Health would have been unwilling to provide the Cardinal Health RSUs to Awardee without including the restrictions and covenants of Awardee set forth above. Further, Awardee and Cardinal Health have agreed and acknowledged that the provisions contained in paragraphs 3 and 4 are ancillary to, or part of, an otherwise enforceable agreement at the time the Cardinal Health RSU Agreements were made.

5. Change of Control . Notwithstanding anything herein to the contrary, (a) in the event a Change of Control occurs ( i.e. , a Change of Control occurs with respect to the Company), then the provisions of Section 16(b) of the Plan shall not apply and the CareFusion RSUs shall continue to vest in accordance with the terms set forth herein and (b) on the date that a “change of control” (as defined in the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended and restated effective as of November 5, 2008) occurs with respect to Cardinal Health, the restrictions applicable to any unvested CareFusion RSUs shall lapse and the Award shall be fully vested.

6. Payment . Awardee will be entitled to receive from the Company the Shares represented by such CareFusion RSUs at the same time as Awardee is or would have been entitled to receive Cardinal Health common shares represented by the Cardinal Health RSUs.

7. Dividend Equivalents . Awardee shall not receive cash dividends on the CareFusion RSUs, but instead shall, with respect to each CareFusion RSU, receive a cash payment from the Company on each cash dividend payment date with respect to the Shares with a record date between the effective time of the Spin-Off and the settlement of such unit pursuant to paragraph 6, with such cash payment to be in an amount equal to the dividend that would have been paid on the Common Share represented by such unit. Cash payments on each cash dividend payment date with respect to the Shares with a record date prior to a Vesting Date shall be accrued until the Vesting Date and paid thereon (subject to the same vesting requirements as the underlying CareFusion RSUs). In addition, if (a) the CareFusion RSUs replace one or more Cardinal Health RSUs that were canceled and (b) Awardee was entitled to one or more cash dividend equivalent payments under the Cardinal Health RSUs that had not been paid prior to the effective time of the Spin-Off because the Cardinal Health RSUs had not yet vested, then the Company shall pay such cash payments on the Vesting Date.

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8. Right of Set-Off . By having accepted the Cardinal Health RSUs, Awardee has agreed that, so long as the amounts are not treated as “non-qualified deferred compensation” under Section 409A of the Internal Revenue Code of 1986, as amended, (a) any amounts Awardee owes from time to time to any member of the Cardinal Group with respect to the CareFusion RSUs may be deducted from, and set-off against, any amounts owed to Awardee by any member of the Cardinal Group from time to time (including, but not limited to, amounts owed to Awardee as director annual retainer fees, meeting fees or fringe benefits) and (b) any amounts Awardee owes from time to time to the Company or any of its Affiliates (the “CareFusion Group”) with respect to the CareFusion RSUs may be deducted from, and set-off against, any amounts owed to Awardee by any member of the CareFusion Group from time to time (including, but not limited to, amounts owed to Awardee as director annual retainer fees, meeting fees or fringe benefits).

9. No Stockholder Rights . Awardee shall have no rights of a stockholder with respect to the CareFusion RSUs, including, without limitation, the right to vote the Shares represented by the CareFusion RSUs.

10. Governing Law/Venue for Dispute Resolution/Costs and Legal Fees . The CareFusion RSUs are governed by the laws of the State of Ohio, without regard to principles of conflicts of law, except to the extent superseded by the laws of the United States of America. Awardee has agreed that the laws of the State of Ohio bear a substantial relationship to the Cardinal Health RSUs and that the benefits granted therein, and thus the CareFusion RSUs and the benefits granted thereunder, would not be granted without their governance by the laws of the State of Ohio. In addition, all legal actions or proceedings relevant to the CareFusion RSUs will be brought exclusively in state or federal courts located in Franklin County, Ohio, and Awardee has consented to the personal jurisdiction of such courts. Awardee has acknowledged that the terms relating to Triggering Conduct, Competitor Triggering Conduct and special forfeiture and repayment rules set forth above are reasonable in nature, are fundamental for the protection of legitimate business and proprietary interests, and do not adversely affect Awardee’s ability to earn a living in any capacity that does not violate such terms. In the event of any violation by Awardee of any such covenants, immediate and irreparable injury for which there is no adequate remedy at law will result. In the event of any violation or attempted violations of these restrictions and covenants, the Cardinal Group will be entitled to specific performance and injunctive relief or other equitable relief, including the issuance ex parte of a temporary restraining order, without any showing of irreparable harm or damage, such irreparable harm being acknowledged and admitted by Awardee, waiving any requirement for the securing or posting of any bond in connection with such remedy, without prejudice to any other rights and remedies afforded the Cardinal Group hereunder or by law. In the event that it becomes necessary for the Cardinal Group to institute legal proceedings under Awardee’s CareFusion RSUs, Awardee will be responsible for all costs and reasonable legal fees with regard to such proceedings. Any term relating to the CareFusion RSUs which is determined by a court of competent jurisdiction to be invalid or unenforceable should be construed or limited in a manner that is valid and enforceable and that comes closest to the business objectives intended by such term, without invalidating or rendering unenforceable the remaining terms.

11. Action by the Administrator . Except as set forth above with respect to Triggering Conduct or Competitor Triggering Conduct, the interpretation of these Terms shall rest exclusively and completely within the sole discretion of the Administrator. Awardee shall be bound by the decisions of the Administrator with regard to the interpretation of these Terms and with regard to any and all matters set forth in these Terms. The Administrator may delegate its functions under these Terms to an officer of the CareFusion Group designated by the

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Administrator (hereinafter the “designee”). In fulfilling its responsibilities hereunder, the Administrator or its designee may rely upon documents, written statements of the parties or such other material as the Administrator or its designee deems appropriate.

12. Electronic Delivery and Consent to Electronic Participation . The Company may, in its sole discretion, decide to deliver any documents related to the CareFusion RSUs or future RSUs that may be granted under the Plan by electronic means. Awardee has consented to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company, including the acceptance of RSU grants and the execution of RSU agreements through electronic signature.

13. Notices . All notices, requests, consents and other communications by Awardee to the Company or Cardinal Health with respect to the CareFusion RSUs are to be delivered in writing and will be deemed sufficient if delivered by hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to the Company or Cardinal Health, as the case may be, at the address set forth below:

CareFusion Corporation

3750 Torrey View Court

San Diego, CA 92130

Attention: Compensation and Benefits Administrator

Facsimile: 858-617-2300

Cardinal Health, Inc.

7000 Cardinal Place

Dublin, Ohio 43017

Attention: Chief Legal Officer

Facsimile: 614-757-2797

All notices, requests consents and other communications by the Company to Awardee with respect to the CareFusion RSUs to be delivered to Awardee may be delivered by e-mail or in writing and will be deemed sufficient if delivered by e-mail, hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to Awardee.

Exhibit 10.15

Confidentiality and Business Protection Agreement

This Confidentiality and Business Protection Agreement (“Agreement”) is hereby entered into by and between Michael C. Kaufmann (“Executive”) and Cardinal Health, Inc., an Ohio Corporation (the “Company”) effective as of February 15, 2010.

It is hereby agreed as follows:

1. Consideration and Acknowledgements . The parties acknowledge that the provisions and covenants contained in this Agreement are in consideration of the base salary increase to Executive effective as of February 15, 2010 and that the limitations contained herein are reasonable in geographic and temporal scope and do not impose a greater restriction or restraint than is necessary to protect the goodwill and other legitimate business interests of the Company. The parties also acknowledge and agree that the provisions of this Agreement do not adversely affect the Executive’s ability to earn a living in any capacity that does not violate the covenants contained herein. The parties further acknowledge and agree that the provisions of Section 9(a) below are accurate and necessary because (i) this Agreement is entered into in the State of Ohio, (ii) Ohio has a substantial relationship to the parties and to this transaction, (iii) Ohio is the headquarters state of the Company, which has operations worldwide and has a compelling interest in having its employees treated uniformly, (iv) the use of Ohio law provides certainty to the parties in any covenant litigation in the United States, and (v) enforcement of the provisions of this Agreement would not violate any fundamental public policy of Ohio or any other jurisdiction.

2. Confidential Information . The Executive shall hold in a fiduciary capacity for the benefit of the Company and all of its subsidiaries, partnerships, joint ventures, limited liability companies, and other affiliates (collectively, the “Cardinal Group”), all secret or confidential information, knowledge or data relating to the Cardinal Group and its businesses (including, without limitation, any proprietary and not publicly available information concerning any processes, methods, trade secrets, research, secret data, costs, names of users or purchasers of their respective products or services, business methods, operating procedures or programs or methods of promotion and sale) that the Executive has obtained or obtains during the Executive’s employment by the Cardinal Group and that is not public knowledge (other than as a result of the Executive’s violation of this Agreement) (“Confidential Information”). For the purposes of this Agreement, information shall not be deemed to be publicly available merely because it is embraced by general disclosures or because individual features or combinations thereof are publicly available. The Executive shall not communicate, divulge or disseminate Confidential Information at any time during or after the Executive’s employment with the Cardinal Group, except with prior written consent of the applicable Cardinal Group company, or as otherwise required by law or legal process. All records, files, memoranda, reports, customer lists, drawings, plans, documents and the like that the Executive uses, prepares or comes into contact with during the course of the Executive’s employment shall remain the sole property of the Company and/or the Cardinal Group, as applicable, and shall be turned over to the applicable Cardinal Group company upon termination of the Executive’s employment.

indirectly contact, solicit, recruit or employ (whether as an employee, officer, director, agent, consultant or independent contractor) any person who was or is at any time during the previous twelve months an employee, representative, officer or director of the Cardinal Group; or (ii) take any action to encourage or induce any employee, representative, officer or director of the Cardinal Group to cease their relationship with the Cardinal Group for any reason. A “Solicitation” does not include any recruitment of employees for the Cardinal Group. The “Restricted Period” means the period of Executive’s employment with the Cardinal Group and the additional period ending twenty-four months after the Executive’s date of termination of employment or date of retirement, as applicable.

4. No Competition — Solicitation of Business . During the Restricted Period, the Executive shall not (either directly or indirectly or as an officer, agent, employee, partner or director of any other company, partnership or entity) solicit, service, or accept on behalf of any competitor of the Cardinal Group the business of (i) any customer of the Cardinal Group at the time of the Executive’s employment or date of termination of employment, or (ii) any potential customer of the Cardinal Group which the Executive knew to be an identified, prospective purchaser of services or products of the Cardinal Group.

5. No Competition — Employment by Competitor . During the Restricted Period, the Executive shall not invest in (other than in a publicly traded company with a maximum investment of no more than 1% of outstanding shares), counsel, advise, or be otherwise engaged or employed by, any entity or enterprise that competes with the Cardinal Group, by developing, manufacturing or selling any product or service of a type, respectively, developed, manufactured or sold by the Cardinal Group (each such person described, and not excepted, as a customer, potential customer or a competitor under Section 4 or this Section 5 of this Agreement is a “Competitor”).

6. No Disparagement .

(a) The Executive and the Company shall at all times refrain from taking actions or making statements, written or oral, that (A) denigrate, disparage or defame the goodwill or reputation of Executive or the Cardinal Group, as the case may be, or any of its trustees, officers, security holders, partners, agents or former or current employees and directors, or (B) are intended to, or may be reasonably expected to, adversely affect the morale of the employees of the Cardinal Group. The Executive further agrees not to make any negative statements to third parties relating to the Executive’s employment or any aspect of the businesses of Cardinal Group and not to make any statements to third parties about the circumstances of the termination of the Executive’s employment, or about the Cardinal Group or its trustees, directors, officers, security holders, partners, agents or former or current employees and directors, except as may be required by a court or governmental body.

(b) The Executive further agrees that, following termination of employment for any reason, the Executive shall assist and cooperate with the Company with regard to any matter or project in which the Executive was involved during the Executive’s employment with the Company, including but not limited to any litigation that may be pending or may arise after such termination of employment. Further, the Executive agrees to notify the Company at the earliest opportunity of any contact that is made by any third parties concerning any such matter or project. The Company shall not unreasonably request such cooperation of Executive and shall cooperate with the Executive in scheduling any assistance by the Executive, taking into account the Executive’s business and personal affairs, and shall compensate the Executive for any lost wages or expenses associated with such cooperation and assistance.

7. Inventions . All plans, discoveries and improvements, whether patentable or unpatentable, made or devised by the Executive, whether alone or jointly with others, from the date of the Executive’s initial employment by the Company and continuing until the end of any period during which the Executive is employed by the Cardinal Group, relating or pertaining in any way to the Executive’s employment with or the business of the Cardinal Group, shall be promptly disclosed in writing to the Secretary of the Board and are hereby transferred to and shall redound to the benefit of the Company, and shall become and remain its sole and exclusive property. The Executive agrees to execute any assignment to the Company or its nominee, of the Executive’s entire right, title and interest in and to any such discoveries and improvements and to execute any other instruments and documents requisite or desirable in applying for and obtaining patents, trademarks or copyrights, at the expense of the Company, with respect thereto in the United States and in all foreign countries, that may be required by the Company. The Executive further agrees at all times to cooperate to the extent and in the manner required by the Company, in the prosecution or defense of any patent or copyright claims or any litigation, or other proceeding involving any trade secrets, processes, discoveries or improvements covered by this Agreement, but all necessary expenses thereof shall be paid by the Company.

8. Acknowledgement and Enforcement . The Executive acknowledges and agrees that: (A) the purpose of the foregoing covenants, including without limitation the noncompetition covenants of Sections 4 and 5, is to protect the goodwill, trade secrets and other Confidential Information of the Company; (B) because of the nature of the business in which the Cardinal Group is engaged and because of the nature of the Confidential Information to which the Executive has access, the Company would suffer irreparable harm and it would be impractical and excessively difficult to determine the actual damages of the Cardinal Group in the event the Executive breached any of the covenants of this Agreement; and (C) remedies at law (such as monetary damages) for any breach of the Executive’s obligations under this Agreement would be inadequate. The Executive therefore agrees and consents that if the Executive commits any breach of a covenant under this Agreement or threatens to commit any such breach, the Company shall have the right (in addition to, and not in lieu of, any other right or remedy that may be available to it) to temporary and permanent injunctive relief from a court of competent jurisdiction, without posting any bond or other security and without the necessity of proof of actual damage.

9. Miscellaneous .

(a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without reference to principles of conflict of laws. If, under any such law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation or ordinance, such portion shall be deemed to be modified or altered to conform thereto. The parties hereto irrevocably agree to submit to the jurisdiction and venue of the courts of the State of Ohio in any action or proceeding brought with respect to or in connection with this Agreement. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:


If to the Executive:		At the most recent address on file for the Executive at the Company.

If to the Company:		Cardinal Health, Inc.
		7000 Cardinal Place
		Dublin, Ohio 43017
		Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with the law.

(d) The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and the Company has caused these presents to be executed in its name and on its behalf, all as of the day and year first above written.

/s/ Michael C. Kaufmann

Michael C. Kaufmann

Execution Date: 3/09, 2010

CARDINAL HEALTH, INC.

/s/ George S. Barrett

By: George S. Barrett

Its: Chairman and Chief Executive Officer

Execution Date: 3-21, 2010

Exhibit 10.16

Confidentiality and Business Protection Agreement

This Confidentiality and Business Protection Agreement (“Agreement”) is hereby entered into by and between Michael A. Lynch (“Executive”) and Cardinal Health, Inc., an Ohio Corporation (the “Company”) effective as of September 29, 2008. It is hereby agreed as follows:

1. Consideration and Acknowledgements . The parties acknowledge that the provisions and covenants contained in this Agreement are ancillary and material to, and in consideration of, the employment letter agreement effective as of September 29, 2008 between the parties and that the limitations contained herein are reasonable in geographic and temporal scope and do not impose a greater restriction or restraint than is necessary to protect the goodwill and other legitimate business interests of the Company. The parties also acknowledge and agree that the provisions of this Agreement do not adversely affect the Executive’s ability to earn a living in any capacity that does not violate the covenants contained herein. The parties further acknowledge and agree that the provisions of Section 9 (a) below are accurate and necessary because (i) this Agreement Is entered into in the State of Ohio, (ii) Ohio has a substantial relationship to the parties and to this transaction, (iii) Ohio is the headquarters state of the Company, which has operations worldwide and has a compelling interest in having its employees treated uniformly, (iv) the use of Ohio law provides certainty to the parties in any covenant litigation in the United States, and (v) enforcement of the provisions of this Agreement would not violate any fundamental public policy of Ohio or any other jurisdiction.

2. Confidential Information . The Executive shall hold in a fiduciary capacity for the benefit of the Company and all of its subsidiaries, partnerships, joint ventures, limited liability companies, and other affiliates (collectively, the “Cardinal Group”), all secret or confidential information, knowledge or data relating to the Cardinal Group and its businesses (including, without limitation, any proprietary and not publicly available information concerning any processes, methods, trade secrets, research secret data, costs, names of users or purchasers of their respective products or services, business methods, operating procedures or programs or methods of promotion and sale) that the Executive has obtained or obtains during the Executive’s employment by the Cardinal Group and that is not public knowledge (other than as a result of the Executive’s violation of this Agreement) (“Confidential Information”). For the purposes of this Agreement, information shall not be deemed to be publicly available merely because it is embraced by general disclosures or because individual features or combinations thereof are publicly available. The Executive shall not communicate, divulge or disseminate Confidential information at any time during or after the Executive’s employment with the Cardinal Group, except with prior written consent of the applicable Cardinal Group company, or as otherwise required by law or legal process. All records, files, memoranda, reports, customer lists, drawings, plans, documents and the like that the Executive uses, prepares or comes into contact with during the course of the

Executive’s employment shall remain the sole property of the Company and/or the Cardinal Group, as applicable, and shall be turned over to the applicable Cardinal Group company upon termination of the Executive’s employment.

3. Non-Recruitment of Cardinal Group Employees, etc. Executive shall not, at any time during the Restricted Period (as defined in this Agreement), without the prior written consent of the Company, engage in the following conduct (a “Solicitation”): (I) directly or indirectly contact, solicit, recruit or employ (whether as an employee, officer, director, agent, consultant or independent contractor) any person who is or, at any time during the previous twelve months was, an employee, representative, officer or director of the Cardinal Group; or (ii) take any action to encourage or induce any employee, representative, officer or director of the Cardinal Group to cease their relationship with the Cardinal Group for any reason. A “Solicitation” does not include any recruitment of employees within or for the Cardinal Group. The “Restricted Period” means the period of Executive’s employment with the Cardinal Group and the additional period ending twenty-four months after the Executive’s date of termination of employment or date of retirement, as applicable.

6. No Disparagement .

Executive’s employment or any aspect of the businesses of Cardinal Group and not to make any statements to third parties about the circumstances of the termination of the Executive’s employment, or about the Cardinal Group or its trustees, directors, officers, security holders, partners, agents or former or current employees and directors, except as may be required by a court or governmental body,

(b) The Executive further agrees that, following termination of employment for any reason, the Executive shall assist and cooperate with the Company with regard to any matter or project in which the Executive was involved during the Executive’s employment with the Company, including but not limited to any litigation that may be pending or arise after such termination of employment, Further, the Executive agrees to notify the Company at the earliest opportunity of any contact that is made by any third parties concerning any such matter or project. The Company shall not unreasonably request such cooperation of Executive and shall cooperate with the Executive in scheduling any assistance by the Executive, taking into account the Executive’s business and personal affairs, and shall compensate the Executive for any lost wages or expenses associated with such cooperation and assistance.

7. Inventions . All plans, discoveries and improvements, whether patentable or unpatentable, made or devised by the Executive, whether alone or jointly with others, from the date of the Executive’s initial employment by the Company and continuing until the end of any period during which the Executive is employed by the Cardinal Group, relating or pertaining in any way to the Executive’s employment with or the business of the Cardinal Group, shall be promptly disclosed in writing to the Secretary of the Board and are hereby transferred to and shall redound to the benefit of the Company, and shall become and remain its sole and exclusive property, The Executive agrees to execute any assignment to the Company or its nominee, of the Executive’s entire right, title and interest in and to any such discoveries and Improvements and to execute any other instruments and documents requisite or desirable in applying for and obtaining patents, trademarks or copyrights, at the expense of the Company, with respect thereto in the United States and in all foreign countries, that may be required by the Company. The Executive further agrees at all times to cooperate to the extent and in the manner required by the Company, in the prosecution or defense of any patent or copyright claims or any litigation, or other proceeding involving any trade secrets, processes, discoveries or Improvements covered by this Agreement, but all necessary expenses thereof shall be paid by the Company.

8. Acknowledgement and Enforcement , The Executive acknowledges and agrees that: (A) the purpose of the foregoing covenants, including without limitation the noncompetition covenants of Sections 4 and 5, is to protect the goodwill, trade secrets and other Confidential Information of the Company; (B) because of the nature of the business in which the Cardinal Group is engaged and because of the nature of the Confidential Information to which the Executive has access, the Company would suffer irreparable harm and it would be impractical and excessively difficult to determine the actual damages of the Cardinal Group in the event the Executive breached any of the

covenants of this Agreement; and (C) remedies at law (such as monetary damages) for any breach of the Executive’s obligations under this Agreement would be inadequate. The Executive therefore agrees and consents that if the Executive commits any breach of a covenant under this Agreement or threatens to commit any such breach, the Company shall have the right (in addition to, and not in lieu of, any other right or remedy that may be available to it) to temporary and permanent injunctive relief from a court of competent jurisdiction, without posting any bond or other security and without the necessity of proof of actual damage.

9. Miscellaneous .


If to the Executive:		At the most recent address on file for the Executive at the Company.
If to the Company:		Cardinal Health, Inc.
		7000 Cardinal Place
		Dublin, Ohio 43017
		Attention: Chief Legal Officer

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

/s/ Michael Lynch

Michael A. Lynch

Execution Date: 10/28, 2008


CARDINAL HEALTH, INC.

/s/ George S. Barrett
By: George S. Barrett
Its: Vice Chairman and CEO, HSCS

Execution Date: , 2008

Exhibit 10.23.8

EXECUTION COPY

OMNIBUS AMENDMENT AND WAIVER

This OMNIBUS AMENDMENT AND WAIVER, dated as of December 15, 2009 (this “ Agreement ”), is by and among:

(i) CARDINAL HEALTH FUNDING, LLC, a Nevada limited liability company (the “ Seller ”);

(ii) CARDINAL HEALTH 110, INC., a Delaware corporation (“ CH-110 ”);

(iii) CARDINAL HEALTH 411, INC., an Ohio Corporation (“ CH-411 ”);

(iv) GRIFFIN CAPITAL, LLC, a Nevada limited liability company (“ Griffin ”);

(v) CARDINAL HEALTH, INC., an Ohio corporation (the “ Performance Guarantor ” and, together with the Seller, CH-110, CH-411 and Griffin, the “ Seller Parties ” and each, a “ Seller Party ”);

(vi) RANGER FUNDING COMPANY LLC (“ Ranger ”), as a Conduit;

(vii) BANK OF AMERICA, N.A. (“ BofA ”), as the Related Financial Institution for Ranger and as the Managing Agent for Ranger’s Purchaser Group;

(viii) WINDMILL FUNDING CORPORATION (“ Windmill ”), as a Conduit;

(ix) THE ROYAL BANK OF SCOTLAND PLC (“ RBS ”), as the Related Financial Institution for Windmill and as the Managing Agent for Windmill’s Purchaser Group;

(x) ATLANTIC ASSET SECURITIZATION LLC (“ Atlantic ”), as a Conduit;

(xi) CALYON NEW YORK BRANCH (“ Calyon ”), as the Related Financial Institution for Atlantic and as the Managing Agent for Atlantic’s Purchaser Group;

(xii) VICTORY RECEIVABLES CORPORATION (“ Victory ”), as a Conduit; and

(xiii) THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH (“ BTMUNY ”), as the Related Financial Institution for Victory, as Managing Agent for Victory’s Purchaser Group and as the Agent (in such capacity, the “ Agent ”).

Capitalized terms used but not otherwise defined herein have the respective meanings assigned thereto in the Receivables Purchase Agreement (as defined below).

BACKGROUND

1. The Seller, Griffin, as Servicer, Ranger, BofA, RBS, Windmill, Atlantic, Calyon, Victory, BTMUNY and the Agent are parties to that certain Third Amended and Restated Receivables Purchase Agreement, dated as of November 19, 2007 (as amended, supplemented and otherwise modified from time to time, the “ Receivables Purchase Agreement ”).

2. Griffin and the Seller, as buyer, are parties to that certain Amended and Restated Receivables Sale Agreement, dated as of May 21, 2004 (as amended, supplemented and otherwise modified from time to time, the “ Second Tier Agreement ”).

3. CH-110, as seller, and Griffin, as buyer, are parties to that certain Second Amended and Restated Receivables Purchase and Sale Agreement, dated as of May 21, 2004 (as amended, supplemented and otherwise modified from time to time, the “ CH-110 First Tier Agreement ”).

4. CH-411, as seller, and Griffin, as buyer, are parties to that certain Receivables Purchase and Sale Agreement, dated as of June 20, 2007 (as amended, supplemented and otherwise modified from time to time, the “ CH-411 First Tier Agreement ”).

5. The Performance Guarantor has executed that certain Second Amended and Restated Performance Guaranty, dated as of June 20, 2007, in favor of the Seller and its successors and assigns (as amended, supplemented and otherwise modified from time to time, the “ Performance Guaranty ”).

6. One or more of the Seller Parties opened lock-boxes 15898 and 15986 (the “ New Lock-Boxes ”) with Bank of America, N.A., in Chicago, IL, in October and November of 2009, respectively, and have directed certain Obligors to make payments in respect of Receivables to one or more of the New Lock-Boxes. Prior to the date hereof, neither New Lock-Box was subject to a Collection Account Agreement, but one or more of the New Lock-Boxes was used by the Seller Parties to receive Collections. The events described in this paragraph 6 constitute breaches by the applicable Seller Parties of their respective obligations set forth in (i) Sections 7.1(j)(i) and 7.2(b) of the Receivables Purchase Agreement, (ii) Sections 4.1(i) and 4.2(b) of the Second Tier Agreement, (iii) Section 5.1(i) of each of the CH-110 First Tier Agreement and the CH-411 First Tier Agreement and (iv) the Performance Guaranty (such breaches, collectively but solely as described in this paragraph 6 , the “ Subject Breaches ”).

7. The occurrence of the Subject Breaches constitutes and/or resulted in certain Termination Events under, and as defined in, the Second Tier Agreement, and certain Amortization Events under the Receivables Purchase Agreement (such Termination Events and Amortization Events, collectively, but solely to the extent occurring on or prior to the date hereof and resulting from the Subject Breaches, together with the Subject Breaches and any failure by appropriate Seller Party to notify the Agent of the occurrence thereof prior to the date hereof, the “ Subject Events ”).

8. On the terms and subject to the conditions set forth herein, (i) the Seller Parties have requested that the Agent, Conduits, Managing Agents and Financial Institutions waive the occurrence of the Subject Events, (ii) Griffin has requested that the Seller and the Agent (as Seller’s assignee) waive the Subject Events under the Second Tier Agreement, (iii) the Performance Guarantor has requested that the Seller and the Agent (as Seller’s assignee) waive the Subject Events under the Performance Guaranty and (iv) CH-110 and CH-411 have

requested that Griffin, Seller (as Griffin’s assignee) and the Agent (as Seller’s assignee) waive the Subject Events under the CH-110 First Tier Agreement and the CH-411 First Tier Agreement.

9. Concurrently herewith, Bank of America, N.A., Griffin, the Seller and the Agent are entering into an amendment to the Bank of America, N.A. Collection Account Agreement in order to make the New Lock-Boxes subject thereto (such amendment, the “ BofA Amendment ”).

10. In connection with the foregoing, the parties hereto desire to amend the Receivables Purchase Agreement, the Second Tier Agreement, the CH-110 First Tier Agreement and the CH-411 First Tier Agreement as set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. Waiver; Limitations .

(a) Waivers . On the terms and subject to the conditions set forth herein (including, without limitation, the limitations set forth in clauses (b) through (c) below):

(i) the Agent, Conduits, Managing Agents and Financial Institutions hereby waive the occurrence of the Subject Events under the Receivables Purchase Agreement;

(ii) each of the Agent and the Seller hereby waives the occurrence of the Subject Events under the Second Tier Agreement;

(iii) each of the Agent and the Seller hereby waives the occurrence of the Subject Events under the Performance Guaranty; and

(iv) each of the Agent, Seller and Griffin hereby waives the occurrence of the Subject Events under the CH-110 First Tier Agreement and the CH-411 First Tier Agreement.

Each of the parties hereto consents to the waivers granted pursuant to this clause (a) . Each of the parties granting a waiver pursuant to clause (i) , (ii) , (iii) or (iv) above, as applicable, is hereinafter referred to as a “ Waiving Party ”.

(b) General Limitations . Notwithstanding anything to the contrary herein or in the Transaction Documents, by executing this Agreement, none of the Waiving Parties is now waiving, nor have any of them agreed to waive in the future, the breach of (or any rights and remedies related to the breach of) any provisions of any Transaction Document, other than as expressly set forth in clause (a) above. Without limiting the generality of the foregoing, none of the Waiving Parties is now waiving, nor have any of them agreed to waive in the future, any Termination Event (as defined under the Second Tier Agreement) or Amortization Event, in either case, occurring after the date hereof.

(c) No Waiver of Indemnification, Etc . Without limiting the generality of the foregoing and for the avoidance of doubt, none of the Waiving Parties is hereby waiving or

releasing, nor have any of them agreed to waive or release in the future, any right or claim to indemnification or reimbursement by, or damages from the Seller Parties or any Affiliate thereof under any Transaction Document, including without limitation, for any liability, obligation, loss, damage, penalty, judgment, settlement, cost, expense or disbursement resulting or arising directly or indirectly from any Subject Event or otherwise.

SECTION 2. Amendments to the Transaction Documents .

(a) RIDER 6 of Exhibit A of each of the CH-110 First Tier Agreement and the CH-411 First Tier Agreement is amended to include the New Lock-Boxes.

(b) Exhibit III of the Second Tier Agreement is amended by replacing the phrase “See Exhibit IV to the Receivables Purchase Agreement” with “See the Collection Account Disclosure Letter”.

(c) The definition of “ Collection Account Disclosure Letter ” set forth in Exhibit I of the Receivables Purchase Agreement is amended by replacing the date “November 13, 2008” with “December 15, 2009”.

SECTION 3. Representations and Warranties .

On the date hereof, each Seller Party hereby represents and warrants (as to itself) that:

(a) after giving effect to this Agreement, the representations and warranties of such Person set forth in the Transaction Documents (as amended and/or waived hereby) to which it is a party are true and correct as of the date hereof, as though made on and as of such date (except to the extent such representations and warranties relate solely to an earlier date and then as of such earlier date); and

(b) this Agreement constitutes the valid and binding obligation of such Person, enforceable against such Person in accordance with its terms.

In addition, each of the Seller and Griffin hereby represents and warrants that, as of the date hereof and after giving effect to this Agreement, no Amortization Event or Potential Amortization Event has occurred and is continuing.

SECTION 4. Conditions to Effectiveness .

This Agreement shall become effective as of the date hereof upon satisfaction of all the following conditions precedent:

(a) receipt by the Agent of counterparts of this Agreement, duly executed by each of the parties hereto;

(b) receipt by the Agent of counterparts of the BofA Amendment, duly executed by each of the parties thereto; and

(c) receipt by the Agent of a duly executed copy of the Collection Account Disclosure Letter (as such term is amended hereby).

SECTION 5. Expenses .

The Seller Parties, jointly and severally, agree to pay (or cause to be paid), all reasonable costs and expenses (including, without limitation, the reasonable fees and out-of-pocket expenses of counsel) incurred by the Agent, Conduits, Managing Agents and Financial Institutions in connection with this Agreement, the transactions contemplated hereby and the Subject Events.

SECTION 6. Counterparts; Delivery .

This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, and each counterpart shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 7. Effect of Amendment; Ratification .

Except as specifically amended hereby, the Receivables Purchase Agreement and the other Transaction Documents are hereby ratified and confirmed in all respects, and all of its provisions shall remain in full force and effect. After this Agreement becomes effective, all references in the Transaction Documents to the Receivables Purchase Agreement, the Second Tier Agreement, the CH-110 First Tier Agreement, the CH-411 First Tier Agreement and the Performance Guaranty shall be deemed to be references to such agreements as amended and/or waived hereby. This Agreement shall not be deemed to expressly or impliedly waive, amend, or supplement any provision of any Transaction Document other than as specifically set forth herein.

SECTION 8. GOVERNING LAW .

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS.

SECTION 9. Section Headings .

The various headings of this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or the other Transaction Documents or any provision hereof or thereof.

[Signatures pages follow.]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.


CARDINAL HEALTH FUNDING, LLC

By: /s/ Lloyd Fort
Name: Lloyd Fort
Title: President

CARDINAL HEALTH 110, INC.

By: /s/ Jorge M. Gomez
Name: Jorge M. Gomez
Title: SVP, Treasurer

CARDINAL HEALTH 411, INC.

By: /s/ Jorge M. Gomez
Name: Jorge M. Gomez
Title: SVP, Treasurer

GRIFFIN CAPITAL, LLC

By: /s/ Lloyd Fort
Name: Lloyd Fort
Title: President

CARDINAL HEALTH, INC., as Performance Guarantor

By: /s/ Jorge M. Gomez
Name: Jorge M. Gomez
Title: SVP, Treasurer

December 2009 Omnibus

Amendment and Waiver

(Cardinal Health)

S-1


RANGER FUNDING COMPANY LLC,
as a Conduit

By: /s/ Doris J. Hearn
Name: Doris J. Hearn
Title: Vice President

BANK OF AMERICA, N.A., as Related Financial Institution for Ranger

By: /s/ William Van Beek
Name: William Van Beek
Title: Principal

BANK OF AMERICA, N.A., as Managing Agent for Ranger’s Purchaser Group

By: /s/ William Van Beek
Name: William Van Beek
Title: Principal

December 2009 Omnibus

Amendment and Waiver

(Cardinal Health)

S-2


WINDMILL FUNDING CORPORATION,
as a Conduit

By: /s/ Jill A. Russo
Name: Jill A. Russo
Title: Vice President

THE ROYAL BANK OF SCOTLAND PLC,
as Related Financial Institution for Windmill

	By:	RBS Securities Inc., as agent

By: /s/ David Viney
Name: David Viney
Title: Managing Director

THE ROYAL BANK OF SCOTLAND PLC,
as Managing Agent for Windmill’s Purchaser Group

	By:	RBS Securities Inc., as agent

By: /s/ David Viney
Name: David Viney
Title: Managing Director

December 2009 Omnibus

Amendment and Waiver

(Cardinal Health)

S-3


ATLANTIC ASSET SECURITIZATION LLC,
as a Conduit

By: /s/ Kostantina Kourmpetis
Name: Kostantina Kourmpetis
Title: Managing Director

By: /s/ Sam Pilcer
Name: Sam Pilcer
Title: Managing Director

CALYON NEW YORK BRANCH, as Related Financial Institution for Atlantic

By: /s/ Kostantina Kourmpetis
Name: Kostantina Kourmpetis
Title: Managing Director

By: /s/ Sam Pilcer
Name: Sam Pilcer
Title: Managing Director

CALYON NEW YORK BRANCH, as Managing Agent for Atlantic’s Purchaser Group

By: /s/ Kostantina Kourmpetis
Name: Kostantina Kourmpetis
Title: Managing Director

By: /s/ Sam Pilcer
Name: Sam Pilcer
Title: Managing Director

VICTORY RECEIVABLES CORPORATION, as a Conduit

By: /s/ David V. DeAngelis
Name: David V. DeAngelis
Title: Vice President

December 2009 Omnibus

Amendment and Waiver

(Cardinal Health)

S-4


THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH,
as Related Financial Institution for Victory

By: /s/ Christine Howatt
Name: Christine Howatt
Title: Authorized Signatory

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH,
as Managing Agent for Victory’s Purchaser Group

By: /s/ Aditya Reddy
Name: Aditya Reddy
Title: VP & Manager

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH,
as Agent

By: /s/ Aditya Reddy
Name: Aditya Reddy
Title: VP & Manager

December 2009 Omnibus

Amendment and Waiver

(Cardinal Health)

S-5

Exhibit 12.1

CARDINAL HEALTH, INC.

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES


	Fiscal Year Ended June 30,
(in millions, except for ratios)	2006			2007			2008			2009			2010
Earnings before income taxes and discontinued operations	$	1,316.3		$	815.3		$	1,295.1		$	1,159.8		$	1,211.6
Plus fixed charges:
Interest expense		102.5			108.2			143.4			118.4			125.5
Capitalized interest		4.1			10.5			13.5			5.1			2.9
Amortization of debt offering costs		3.4			7.4			3.5			3.8			9.9
Interest portion of rent expense		16.8			15.6			12.2			11.1			6.0

Fixed charges		126.8			141.7			172.6			138.4			144.3
Plus amortization of capitalized interest		2.9			1.3			1.5			2.5			6.5
Less capitalized interest		(4.1	)		(10.5	)		(13.5	)		(5.1	)		(2.9	)

Earnings	$	1,441.9		$	947.8		$	1,455.7		$	1,295.6		$	1,359.5

Ratio of earnings to fixed charges (1)		11.4			6.7			8.4			9.4			9.4

⁽¹⁾

The ratio of earnings to fixed charges is computed by dividing fixed charges into earnings before income taxes and discontinued operations plus fixed charges and capitalized interest. Fixed charges include interest expense, amortization of debt offering costs and the portion of rent expense that is deemed to be representative of the interest factor. Interest expense recorded on tax exposures has been recorded in income tax expense and has therefore been excluded from the calculation.

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

AS OF 06/30/10


Subsidiary Name		State / Jurisdiction of Incorporation

6464661 Canada, Inc.		Canada

Abilene Nuclear, LLC		Delaware

Allegiance 1, LLC		Delaware

Allegiance (BVI) Holdings Co. Ltd.		British Virgin Islands

Allegiance Corporation		Delaware

Allegiance Healthcare (Labuan) Pte. Ltd.		Malaysia

Allegiance Labuan Holdings Pte. Ltd.		Malaysia

Almus Pharmaceuticals Singapore Pte. Ltd.		Singapore

API (Suppliers) Limited		United Kingdom

Arch Collection Corporation		Delaware

Arch S.A.		Luxembourg

Beckloff Associates, Inc.		Kansas

Borschow Hospital & Medical Supplies, Inc.		Puerto Rico

C. International, Inc.		Ohio

Cardinal Distribution Holding Corporation – I		Nevada

Cardinal Distribution Holding Corporation – II		Nevada

Cardinal Health (P02296)		Maryland

Cardinal Health (P04080)		Maryland

Cardinal Health 100, Inc.		Indiana


Cardinal Health 104 LP		Ohio

Cardinal Health 105, Inc.		Ohio

Cardinal Health 107, Inc.		Ohio

Cardinal Health 108, Inc.		Tennessee

Cardinal Health 110, Inc.		Delaware

Cardinal Health 111, LLC		Delaware

Cardinal Health 112, LLC		Delaware

Cardinal Health 113, LLC		Wisconsin

Cardinal Health 114, Inc.		Delaware

Cardinal Health 115, LLC		Ohio

Cardinal Health 116, LLC		Delaware

Cardinal Health 117, LLC		Massachusetts

Cardinal Health 2, Inc.		Nevada

Cardinal Health 200, LLC		Delaware

Cardinal Health 201, Inc.		Delaware

Cardinal Health 201 Canada L.P.		Canada

Cardinal Health 215, LLC		Delaware

Cardinal Health 222 (Thailand) Ltd.		Thailand

Cardinal Health 3, LLC		Delaware

Cardinal Health 411, Inc.		Ohio

Cardinal Health 414, LLC		Delaware

Cardinal Health 418, Inc.		Delaware

Cardinal Health 421 Limited Partnership		Scotland

Cardinal Health 5, LLC		Delaware

Cardinal Health 6, Inc.		Nevada


Cardinal Health 7, LLC		Delaware

Cardinal Health Canada 204, Inc.		Canada

Cardinal Health Capital Corporation		Ohio

Cardinal Health Cardiology Solutions, LLC		Delaware

Cardinal Health Corporate Solutions, LLC		Nevada

Cardinal Health D.R. 203 II Ltd.		Bermuda

Cardinal Health Finance		United Kingdom

Cardinal Health Funding, LLC		Nevada

Cardinal Health Holding International, Inc.		New Jersey

Cardinal Health IPS, LLC		Delaware

Cardinal Health Ireland 406 Ltd.		Ireland

Cardinal Health Ireland 419 Limited		Ireland

Cardinal Health Luxembourg 420 S.â.r.l.		Luxembourg

Cardinal Health Malaysia 211 Sdn. Bhd.		Malaysia

Cardinal Health Malta 212 Limited		Malta

Cardinal Health MPB, Inc.		Missouri

Cardinal Health Napoleon Holding, LLC		Delaware

Cardinal Health P.R. 218, Inc.		Puerto Rico

Cardinal Health P.R. 409 B.V.		The Netherlands

Cardinal Health P.R. 436, Inc.		Puerto Rico

Cardinal Health Pharmaceutical Contracting, LLC		Delaware

Cardinal Health Pharmacy Services, LLC		Delaware

Cardinal Health Singapore 225 Pte. Ltd.		Singapore

Cardinal Health Systems, Inc.		Ohio


Cardinal Health Technologies Switzerland GmbH		Switzerland

Cardinal Health Technologies, LLC		Nevada

Cardinal Health U.K. 100 Limited		United Kingdom

Cardinal Health U.K. 101 Limited		United Kingdom

Cardinal Health U.K. 105 Limited		United Kingdom

Cardinal Health U.K. 418 Limited		United Kingdom

Cardinal Health U.K. 432 Limited		United Kingdom

Cardinal Health U.K. Holding Limited		United Kingdom

Cardinal Health U.K. International Holding LLP		United Kingdom

CCB, Inc.		Iowa

Centralia Pharmacy, Inc.		Iowa

Cirpro de Delicias S.A. de C.V.		Mexico

Convertors de Mexico S.A. de C.V.		Mexico

CR Medicap, Inc.		Iowa

Desert PET, LLC		California

DuQuoin Pharmacy, Inc.		Iowa

Dutch American Manufacturers II (D.A.M. II) B.V.		The Netherlands

East Iowa Pharmacies, Inc.		Iowa

Ellipticare, LLC		Delaware

EPIC Insurance Company		Vermont

Grand Avenue Pharmacy, Inc.		Missouri

Griffin Capital, LLC		Nevada

Inland Empire Regional PET Center, LLC		California


InteCardia-Tennessee East Catheterization, LLC		North Carolina

InteCardia-Tennessee East Diagnostic, LLC		North Carolina

Intercare Holdings Limited		United Kingdom

Intercare Investments Limited		United Kingdom

Iowa Falls Pharmacy, Inc.		Iowa

JRG, Ltd.		Iowa

Killilea Development Company, Ltd.		Ohio

Lake Charles Pharmaceutical and Medical Equipment Supply Company, LLC		Louisiana

Leader Drugstores, Inc.		Delaware

Medicap Pharmacies Incorporated		Iowa

Medicine Shoppe Capital Corporation		Nevada

Medicine Shoppe International, Inc.		Delaware

Medicine Shoppe Internet, Inc.		Missouri

Midland Pharmacies, Inc.		Iowa

MRI Equipment Partners, Ltd.		Texas

Multi-Medica S.A.		Belgium

One Cloverleaf, LLC		Delaware

Owen Shared Services, Inc.		Texas

Parch, L.L.C.		Delaware

Parmed Pharmaceuticals, Inc.		Delaware

Pharmacy Operations of New York, Inc.		New York

Pharmacy Operations, Inc.		Delaware


Physicians Purchasing, Inc.		Nevada

Pinnacle Intellectual Property Services International, Inc.		Nevada

Pinnacle Intellectual Property Services, Inc.		Nevada

Quiroproductos de Cuauhtemoc S. de R.L. de C.V.		Mexico

Ransdell Surgical, Inc.		Kentucky

RxealTIME, Inc.		Nevada

Sierra Radiopharmacy, LLC		Nevada

Source Medical Corporation		Canada

SRx, Inc.		Iowa

Supplyline Technologies Limited		Ireland

Syncor Belgium SPRL		Belgium

Toledo Pharmacy Co.		Iowa

Virginia Imaging Center, LLC		Virginia

West Texas Nuclear Pharmacy Partners		Texas

Yorkshire Pharmacy, Inc.		Iowa

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

(1)

Registration Statement on Form S-3 (No. 333-145924) of Cardinal Health, Inc.,

(2)

Registration Statements on Form S-4 (No. 333-62938 and No. 333-74761) of Cardinal Health, Inc., and

(3)

Registration Statements on Form S-8 (No. 333-42357, No. 33-64337, No. 333-71727, No. 333-91849, No. 333-72727, No. 333-68819, No. 333-90417, No. 333-90423, No. 333-92841, No. 333-38198, No. 333-38190, No. 333-38192, No. 333-56010, No. 333-53394, No. 333-102369, No. 333-100564, No. 333-120006, No. 333-129725, No. 333-144368, No. 333-149107, No. 333-155156, No. 333-155158, No. 333-163128, and No. 333-164736) of Cardinal Health, Inc.,

of our reports dated August 26, 2010, with respect to the consolidated financial statements and schedule of Cardinal Health, Inc. and the effectiveness of internal control over financial reporting of Cardinal Health, Inc., included in this Annual Report (Form 10-K) of Cardinal Health, Inc. for the fiscal year ended June 30, 2010.

/s/ Ernst & Young LLP

Ernst & Young LLP

Columbus, Ohio

August 26, 2010

Exhibit 31.1

I, George S. Barrett, certify that:

I have reviewed this Form 10-K of Cardinal Health, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 26, 2010

/s/ George S. Barrett

George S. Barrett

Chairman and Chief Executive Officer

Exhibit 31.2

I, Jeffrey W. Henderson, certify that:

I have reviewed this Form 10-K of Cardinal Health, Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 26, 2010

/s/ Jeffrey W. Henderson

Jeffrey W. Henderson

Chief Financial Officer

Exhibit 32.1

Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, George S. Barrett, Chairman and Chief Executive Officer of Cardinal Health, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, that:

(1)

the Annual Report on Form 10-K for the fiscal year ended June 30, 2010 containing the financial statements of the Company (the “Periodic Report”), which this statement accompanies, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2)	the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 26, 2010

/s/ George S. Barrett

George S. Barrett

Chairman and Chief Executive Officer

Exhibit 32.2

Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Jeffrey W. Henderson, Chief Financial Officer of Cardinal Health, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, that:

(1)

(2)	the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 26, 2010

/s/ Jeffrey W. Henderson

Jeffrey W. Henderson

Chief Financial Officer

Exhibit 99.1

STATEMENT REGARDING FORWARD-LOOKING INFORMATION

As used in this exhibit, “Cardinal Health,” the “Company,” “we,” “our,” “us” and similar pronouns refer to Cardinal Health, Inc. and its subsidiaries, unless the context requires otherwise. Our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended June 30, 2010 (the “2010 Form 10-K”), our Annual Report to Shareholders, any quarterly report on Form 10-Q or any of our current reports on Form 8-K (along with any exhibits to such reports as well as any amendments to such reports), our press releases, or any other written or oral statements made by or on behalf of us, may include directly or by incorporation by reference forward-looking statements which reflect our current view (as of the date such forward-looking statement is first made) with respect to future events, prospects, projections or financial performance. The matters discussed in these forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied in or by such statements. These risks and uncertainties include, but are not limited to:

•

competitive pressures in the markets in which we operate, including pricing pressures;

•

increasing consolidation in the healthcare industry, which could give the resulting enterprises greater bargaining power and may increase pressure on prices for our products and services;

•

uncertainties due to government healthcare reform, including the impact of the recently enacted health care reform legislation;

•

legislative changes to the prescription drug reimbursement formula and related reporting requirements for generic pharmaceuticals under Medicaid;

•

the loss of or material reduction in purchases by, or default by one or more key customers;

•

the loss of, or default by, one or more key suppliers for which alternative suppliers may not be readily available;

•

unfavorable changes to the terms of key customer or supplier relationships, or changes in customer mix;

•

changes in manufacturers’ pricing, selling, inventory, distribution or supply policies or practices, including policies concerning price appreciation;

•

changes in hospital buying groups or hospital buying practices;

•

changes in the frequency or magnitude of branded pharmaceutical price appreciation or generic pharmaceutical price deflation, restrictions in the amount of inventory available to us, or changes in the timing of generic launches or the introduction of branded pharmaceuticals;

•

uncertainties relating to market conditions for pharmaceuticals;

•

uncertainties relating to demand for our products and services;

•

changes in the distribution or outsourcing pattern for pharmaceutical and medical/surgical products and services, including an increase in direct distribution;

•

the costs, difficulties and uncertainties related to the integration of acquired businesses, including liabilities related to the operations or activities of such businesses prior to their acquisition;

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our ability to achieve the expected benefits from the acquisition of Healthcare Solutions Holding and to grow our specialty distribution business;

•

uncertainties related to our divestiture strategy, including difficulties in finding buyers or alternative exit strategies at acceptable prices and terms and in a timely manner;

•

our ability to introduce and market new products and our ability to keep pace with advances in technology;

•

changes in laws and regulations or in the interpretation or application of laws or regulations, as well as possible failures to comply with applicable laws or regulations as a result of possible misinterpretations or misapplications;

•

the continued financial viability and success of our customers, suppliers and franchisees;

•

actions of regulatory bodies and other governmental authorities, including the U.S. Drug Enforcement Administration, the U.S. Food and Drug Administration, the U.S. Nuclear Regulatory Commission, the U.S. Department of Health and Human Services, various state boards of pharmacy, state health departments, and state insurance departments or comparable agencies that could delay, limit or suspend product development, manufacturing, distribution or sales or result in warning letters, recalls, seizures, injunctions and monetary sanctions;

•

costs or claims resulting from potential errors or defects in our manufacturing, compounding, repackaging, information systems or pharmacy management services that may injure persons or damage property or operations, including costs from remediation efforts or recalls;

•

the results, costs, effects or timing of any commercial disputes, patent infringement claims, or other legal proceedings;

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the costs, effects, timing or success of restructuring programs or plans;

•

increased costs for commodities used in the Medical segment including various components, compounds, raw materials or energy such as oil, oil-related and other commodities;

•

shortages in commodities, components, compounds, raw materials or energy used by our businesses, including supply disruptions of radioisotopes;

•

the risks of counterfeit products in the supply chain;

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risks associated with global operations, including the effect of local economic environments, inflation, recession, currency volatility and global competition, in addition to risks associated with compliance with U.S and international laws relating to global operations;

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difficulties or delays in the development, production, manufacturing, sourcing and marketing of new or existing products and services, including difficulties or delays associated with obtaining requisite regulatory consents or approvals associated with those activities;

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disruption or damage to or failure of our information or controls systems;

•

uncertainties relating to general political, business, industry, regulatory and market conditions;

•

risks associated with the spin-off of CareFusion Corporation (“CareFusion”), including risks of non-performance under spin-off agreements, and risks relating to adverse tax consequences to us and/or our shareholders;

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risks associated with our minority investment in CareFusion such as risks relating to CareFusion’s business and risks relating to the disposition of the shares of CareFusion common stock currently held by us; and

•

other factors described in “Item 1A: Risk Factors” of the 2010 Form 10-K.

The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “will,” “should,” “could,” “would,” “project,” “continue,” and similar expressions generally identify “forward-looking statements,” which speak only as of the date the statement was made, and also include statements reflecting future results or guidance, statements of outlook and tax accruals. We undertake no obligation to update or revise any forward-looking statements, except to the extent required by applicable law.