I'm all for a meritocratic culture, but sorry Mark, this has nothing to do with merit. People who believed in you joined your company early and invested in it. Irrespective of their performance, it's not their fault that their bet was right and now that you're on the verge of success, you have to pay up. Deal with it. If you're concerned about their performance, let them go based on that and not an ultimatum to return stock.