They will have nothing but the name of the company and will not be ale to compete with you. Any moral obligation you had to the guy who came up with the idea got thrown out of the window then he tried to screw you out of the company.
Edit:
If that is really what is going on here. Make sure that it's not just a misunderstanding.
They very likely have the failure bound mindset of "ideas are the most important thing, I'll just hire a guy off craigslist to write the code". My prediction is if you quit they'll think "so what" and try to hire some random engineer without understanding what they'd have to do then burn through the money and fade away (or just keep the money and do nothing).
I don't know what contracts you signed but make sure you check that first (and talk to a lawyer).
Also sounds like one of these scummy incubators that charge mentor fees and the like (basically tax evasion schemes). 4 founders seems like a lot if there's just one engineer.
Even still get your own legal advice and draw around you a group of people who haven't been involved who you can turn to for advice and support.
"Networking" might have really been codeword for partying, buying the drinks to get people to listen, who when pressed to buy come up with a lame excuse and scram. All the while you were writing the code.
By all means get legal advice. But it seems that option 2 might be viable. GOOD LUCK!