From Kevin McGran of the Toronto Star:
The dispute boils down transition rules between successive collective bargaining agreements, including the interpretation of the 2005 CBA's definition of a "free agent" contrasted with Frogren's status as a "defected" player under the previous CBA. "Defected status" was his official listing, resulting from the fact he had been drafted by the Calgary Flames in 1998, but never came to the NHL.
"It comes down to a question of interpretation," said a source close to the deal. "The CBA is relatively new and things haven't happened before where they've had to deal with it."This is one of those instances where they've never had a 28-year-old free agent signing his first contract. There's an interpretation issue."
Read the entire article here.
Considering Frogren was drafted by the Flames way back in 1998, I would tend to think he should not be limited to an entry level contract.