Hi @mHVK21
Your pending H4 extension can continue its processing. The employer can only withdraw the H1B and not the H4 extension application.
If USCIS needs information about your H1B status after your old employer withdraws their H1B, USCIS will send an RFE to request more documents.
Your wife can stay in the US as long as she has a pending H4 application.
But, if you want to be on the absolutely safe side, you can apply for H4 transfer as well to make sure there are no RFEs or unintentional denials from USCIS.