It doesn't look like a terrible clause. It's basically a kill fee, but not. They're saying, it seems, that if they put out the money for the art, ISBN, copyright, etc..and you, the author, change your mind about publishing with them, then they want to be reimbursed for their money and time.
Which doesn't seem unreasonable to me, especially if they really are doing marketing and promotion. If I was promoting something for sale and it suddenly wasn't available, through no fault of my own, I'd want compensation too. Essentially it's the author breaking the contract, and there should be a penalty for it, especially if the other party has lived up to their end of it.
It's one of those CYA clauses I would be aware of, but doubt is ever used.
FWIW, I have a SK book here, waiting for me to read and review. The cover art is very nice and quality is standard trade paperback. Once I get around to reading it, I'll let you know what I think.