Holdback in Escrow outside APA - Need Advice

I am acquiring a business via an asset purchase. Post-signing, the business has deteriorated, and we are trying to structure a holdback of ~$200k–$250k without reopening the APA or triggering lender re-underwriting, in the last minute. The current idea is: - Seller receives full proceeds at closing - Seller then places $250k into escrow under a side agreement - Funds are released if revenue recovers within 9–12 months - If not, funds are returned to me I need your help to understand: 1. How is this treated for the seller, are they taxed on the full proceeds at closing regardless of escrow? 2. If the escrow is returned to me, is that treated as a purchase price adjustment (basis reduction) or taxable income? 3. Does structuring this as escrow vs seller note vs contingent payment materially change tax outcomes? 4. What structure would best preserve purchase price adjustment treatment and avoid unintended income recognition? 5. Are there risks with the IRS recharacterizing this if not properly documented? I want a structure that is clean, defensible, and does not create surprises post-close. Please provide your input, or comment if you can help.