Sears Holdings Corp. will pay Edward Lampert $1 a year to stay on as CEO, but will also give the billionaire hedge fund manager the opportunity for up to $6.5 million in additional compensation.

Mr. Lampert, 50, who took over as CEO in February after Louis D'Ambrosio stepped down, may receive up to $2 million in cash or stock, based on Sears' 2013 earnings performance, plus as much as $4.5 million in stock, payable in monthly installments as long as he remains CEO, according to regulatory documents.

Mr. Lampert also continues his role as chairman and largest shareholder of the Hoffman Estates-based retailer. He will continue to be based in the Miami area.

Meanwhile, Mr. D'Ambrosio's 2012 compensation package fell nearly 90 percent, to $1.3 million. His $1 million base salary remained virtually unchanged. But in 2012 he did not receive any stock awards or bonus in 2012 after taking home $8 million in stock and a $150,000 bonus in 2011.

A Sears spokesman says the discrepancy in year-over-year compensation is due to the shares’ vesting timeline. When he was named CEO in early 2011, Mr. D’Ambrosio received the $8 million in stock as a one-time restricted award to be paid out in three annual installments. More than a third, or about 35,000 of those shares, vested in February 2012. Another 35,000 shares vested on his last day of employment this year, Feb. 24. They have a value of about $1.8 million based on Sears’ Thursday closing price of $49.97. Mr. D’Ambrosio forfeited the remaining 23,000 shares that would have had a current value of $1.1 million and would not have vested until 2014. Mr. D’Ambrosio's $150,000 bonus in 2011 was a signing bonus and thus not awarded again in 2012, the spokesman says.

Mr. D'Ambrosio did not receive any severance payments upon leaving Sears.

Mr. D'Ambrosio, who before coming to Sears was president and CEO of Avaya Inc., a communications company, will remain on the retailer's board until its annual meeting in May.

In the regulatory filings, Sears wrote that it "continued to take a fiscally conservative approach to compensation" in 2012 due to uncertain retail conditions.

The base salaries of Mr. D'Ambrosio, along with CFO Robert Schriesheim, Chief Merchandising Officer Ronald Boire, general counsel Dane Drobny and Imran Jooma, the executive vice president overseeing online services, remained unchanged in 2012 from what they had been in 2011.

In 2013, Mr. Jooma will get a raise of $100,000, to $750,000. Mr. Drobny received a $50,000 salary increase, to $700,000.

Mr. Boire, who lives in the greater New York metropolitan area and commutes to Hoffman Estates, was also paid $148,323 in commuter benefits, including more than $55,000 for weekly round-trip commercial air fare; $36,000 for housing in the Hoffman Estates area, and more than $19,000 for transportation between his residences and airports. He also received nearly $33,000 to offset the tax liability incurred from receiving commuter benefits.

Sears Holdings has been plagued by a years-long decline in sales at its Sears and Kmart stores.

Results for the fourth quarter, which ended Feb. 2, showed a loss of $489 million, or $4.61 a share.