if that is true, that's just a mess. They would not have any product without them.
I really wonder how you can face your fired employes and tell them that all their stocks are gone but that they can do some consulting do get those back.
Options in the old company would have been worth even less given the preference overhang from existing investors! The new company is actually good news for employees as a clean cap table and a reasonable (lower) valuation gives employees a realistic chance that their options will ever be "in the money."
I really wonder how you can face your fired employes and tell them that all their stocks are gone but that they can do some consulting do get those back.