Paramount Pictures and Polygram Filmed Entertainment are negotiating to enter into a three-year, co-financing arrangement that would encompass an estimated 10 to 12 big-budget films, sources said. The deal is ex-pected to include a third party.

Sources close to the negotiations said that the deal is not expected to be finalized until the summer.

Polygram has entered into discussions with South Korean investors for outside financing — said to be 20% — of the overall slate.

Under the terms of the proposed deal, whichever partner originates a project would take domestic rights; the other partner would get foreign. In Paramount’s case, UIP would handle overseas.

For Paramount, the deal would continue its co-financing strategy for bigger-budgeted films with a familiar partner. The studio and Polygram have joined forces on such films as “The Relic,” the summer offering “The Flood” and Jodie Foster’s Egg Prods.’ “Home for the Holidays.” All were distributed domestically by Paramount with Polygram handling overseas distribution.

For Polygram, the deal would help establish its presence as a domestic distributor and would further its goal of producing big-budget films within a framework that spreads the financial risk over a number of years.

Polygram has been moving toward its long-term goals aggressively, having recently signed A-list talent such as Michael Douglas in Propaganda’s “The Game” and Robin Williams in Interscope’s “What Dreams May Come.” The Dutch conglom also recently tapped former TriStar distrib head William Soady to steer its own nascent U.S. distrib division.

The hitch in the deal may be the Koreans. While as many as five South Korean companies have been wooed, the economy there is grappling with a severe foreign trade deficit; it’s been hard hit by a strong dollar, with the dwon plummeting against the greenback in the last five months. Korean distribs also have suffered losses from disastrous output deals with some U.S. indie film companies.

The Poly/Par deal would join several other co-financing arrangements that Paramount has entered into, including ones with Douglas/Reuther, Lakeshore Entertainment, Cloud Nine Entertainment and more recently Seven Arts.

Par also has entered into such one-off, split-rights deals as “Titanic” with 20th Century Fox and “Face Off” with Disney. With both films, Paramount is handling domestic distribution and the other studios will distribute foreign.

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