H4 to H1 after husband's H1 terminated

[confuciousI]

My situation is very complicated.

We suspected that my husband might be losing his job, so we immediately applied for my H1 visa. Today we got a letter from his employer about his termination.

My H1-B application was sent out this week. The letter from the employer says that they terminated him from employment as of the week before.

1. Does my husband loose his H1 status effective the termination date or the date when the INS actually terminates it?

2. If the answer to the above is YES, then, is there a grace period for my application for H1 to be considered? Or will it be rejected?

Any advise will be greatly appreciated.
Thanks.