Having expressed his concern over his future with Rangers at the weekend in the absence of any contact with club officials, Papac was preparing to enlist the services of an agent to assess his options.
But Rangers manager Walter Smith revealed that the 30-year-old held initial talks with chief executive Martin Bain yesterday morning and is hopeful it will lead to a new agreement.
"Things were complicated by the recent head injury Sasa sustained," said Smith. "Before he got the concussion, Martin had arranged to sit down with him in Turkey when we were there for the Bursaspor game earlier this month.
"But Sasa didn't go there because of the concussion, then was down with 'flu on two other occasions. But Martin met with him this morning to open up talks. We are hopeful we can agree a new deal and Sasa would like to stay at the club as well."
Uncertainty remains over Kenny Miller's future at the club, although reports that the Scotland striker has already agreed a pre-contract move to Turkish champions Bursaspor at the end of the season were discounted by Smith.
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Miller, who has scored 22 goals for Rangers so far this season, is also out of contract in the summer and has so far been unable to agree terms on a new deal. While Smith has become accustomed to financial circumstances which dictate any of his players are vulnerable to bids from other clubs, he expects to have both Miller and Papac at his disposal for the rest of this season at least. "There has been no enquiry for Kenny or any other player," added Smith.
"Hopefully it will stay that way. Kenny has intimated to us that he wants to stay here if he can and that's why the negotiations are taking place.
"For the last couple of years, we've had a scenario where I've told all of our players they were effectively all for sale. We are still operating at that kind of level. It's a very difficult situation when you have players who have been doing extremely well for you over a period of time.
"Kenny in particular has done well but at the moment we can't come to an agreement with his contract. The players have been working under these circumstances and have just had to handle it.
"The way I have been doing it is to proceed as if we will have them at the end of the season and then see where we are. The guys who have been playing here are all reasonably settled. I don't think many of them would be desperate to leave the place.
"But the financial aspects are paramount, especially when you reach Kenny and Sasa's age. It's an important time for a footballer."
Meanwhile, Smith said he was delighted to be able to hand Jamie Ness his first-team debut at Fir Park on Sunday after a difficult spell for the teenager. The 19-year-old played the last 17 minutes of Rangers' 4-1 victory over Motherwell on Boxing Day, putting in a composed performance in midfield.
Smith had hoped to give Ness his competitive debut before Sunday but a string of injuries held back his progress. But the Rangers manager was glad to finally include Ness after handing his fellow Murray Park graduates Kyle Hutton, Gregg Wylde, Darren Cole, Rory Loy and Jordan McMillan their debuts already this season.
Smith said: "Jamie's finally back to full fitness again after a difficult period and that's really good news for us. It has been an awkward spell for him and that's at least a couple of seasons now where he has never really had any consistency of play.
"He has even been held back in training because he has been getting numerous injuries. That happens to younger players and it has happened to him. But he has now shown a steadiness in his training, he has stayed injury free and he has been excellent for us."