Medical device maker CareFusion Corp. said Tuesday that it named Kieran T. Gallahue chairman and CEO to succeed David L. Schlotterbeck, who is retiring.

Schlotterbeck, 63, previously announced plans to retire as of Feb. 28.

Gallahue, 47, was most recently president and CEO of ResMed Inc., which has named its founder Peter Farrell as a replacement on an interim basis.

CareFusion said its initial employment contract with Gallahue lasts three years, with renewals for consecutive one-year terms. It will pay him a base salary of $1.15 million with a target annual bonus incentive for up to 120 percent of his base salary. It will also give him a cash sign-on bonus of $650,000 and a sign-on equity award of performance stock units based on a value of $7.2 million.

The deal also give Gallahue stock options with a $5.66 million value and restricted stock units of $10.58 million to compensate him for forfeiting the value of equity grants from ResMed.

Gallahue is also eligible for an annual long-term incentive grant in fiscal 2012 at the time grants are generally made to other senior executives.

He will also be eligible to participate in the company's retirement and other employee benefit programs.

In afternoon trading, CareFusion shares added 65 cents, or 2.5 percent, to $26.38.