You can only cash out 12.5%. 12 month non-compete for a small cash out is a pretty double edged deal.

But if you are still working there and do not plan to move then being able to liquidate up to $500,000 worth of shares seems like a very good offer.

If you can liquidate $500,000 worth of shares, that means you still have at least $3,500,000 worth of shares in a company that has no plans to ever go public.

For their California employees who wish to stay in California, the non-compete doesn't matter much. They are virtually unenforceable here.

I am not a lawyer, but it's possible the non-compete is enforceable in California in this case.

When an employee gets something "in kind" for the non-compete agreement, which arguably this is, then it may be upheld. For example, if a company pays you non-salary money in exchange for a non-compete agreement, then it may be upheld. Consider the case of former HP CEO Mark Hurd when he went to Oracle.

What's not enforceable in CA are non-competes in, for example, normal employment contracts that apply to everyone.

Edit: To be clear, Mark Hurd was allowed to work at Oracle, but he had to give the money back he got for signing the agreement.

Being standard doesn't mean it's not shitty.