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Does this mean that the team in question would need to either release him (and eat the contract) or place him back on the active roster?
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Yes, since he won't go to the minors those are the only options.
In OOTP there are only two kinds of waivers, revocable and irrevocable... the manual (for some reason) is describing "real life" waivers which aren't necessary in ootp.
Players who are out of options cannot be placed on revocable waivers, players with options can.