Pead is actually in the fourth year of his contract (part 2012 draft class). According to Over The Cap (
http://overthecap.com/player/isaiah-pead/1324/), Pead did not sign an extension, he just took a pay cut on his base salary from $940K to $585K so his base pay is now in line with his competition: Watts (prorated salary after the suspension $382.5K), Reynolds ($585K salary), Brown ($435K salary), and Laskey ($435K salary).
With Watts' suspension and Gurley's early season inactivity, I actually think Pead has a very strong chance of taking the final RB spot. Note: The UDFA's (Brown & Laskey) (not sure about Watts) are all eligible for the Practice squad while Pead is not. When Watts suspension ends and Gurley gets going (probably about the same approximate time frame) then Pead could be in jeopardy of being released but by then he may also have had a chance to prove his value as well.