why would you play him at all? i wouldn't even register him.
Why wouldn't you play him at all if he works hard in practice and does what he is asked to do? The point is to demote him to a squad role if you can't sell him in good terms. Only if he causes trouble in the team he needs to be punished. You can't punish him if he just wants to fulfill his contract.
Order of priorities for me is:
1) Sell him for free but with no payment for years left of his contract
2) And if 1) fails, Keep him until the end of his contract while making sure he can't use any clause that extends his stay. Give him the minutes you usually give to veterans who can't physically play more than 45 mins at a good level. Bench options in games where his experience might count for something.
3) Punish him if he misbehaves or shows he doesn't understand his new role.