Multiple results are possible depending on the details of the sale AND the details of your shares.
If you own shares (as opposed to options), you will either receive cash OR shares in the other company OR shares in your own company may be preserved (if your company continues to exist as a corporation just owned by a holding company). Which depends on the agreement with the larger company.
As to when you should cash them out - you may want to talk to a financial advisor. It's not a straightforward choice; your shares or options may rise in value or drop in value with the sale, depending on how it's sold. If this is a 'good' company looking to sell just because it's the right time to do so, they may rise in value. If your CEO is looking to get out of the business, then they may just take whatever they can get and your shares could lose value. And of course some of this depends on how you could cash out your shares - assuming your company is not public, this may be complicated, and if your CEO is selling they may disincentivize cashing out (or may incentivize it).
I don't think the 4th question really falls into personal finance; ultimately your options are, again, determined by the sale, and you might be given a buyout or might just be terminated, but either way it sounds like having a good solid backup plan is a great idea right now.