OK, this is basically how it was done last year:
If you lost an "A" (90+) Free agent you received a sandwich pick between rounds 1 and 2. In addition you received the team that signed him's 2nd round pick, or if they no longer had that pick you received a sandwich pick between the 2nd and 3rd round. The team that signed him loses their 2nd pick, or if that pick is not available you lose your next best pick.
If you lost a "B" (Next best free agents that bring the total # of picks to 180 after compensation for "A' and "B" free agents) free agent you received a pick after the 5th round.
Any comments? I'm also going to be posting something regarding trading draft picks. I think this has worked well, but could use some tweaking to work better with draft pick compensation.