By Jessica Toonkel

NEW YORK (Reuters) - - Viacom Inc's <VIAB.O> board of directors is expected to meet on Thursday night to discuss a settlement with controlling shareholder Sumner Redstone that would result in the departure of Chief Executive Philippe Dauman, a source familiar with the situation told Reuters.

The board is due to meet this evening, although the timing could change, according to the source, who wished to remain anonymous because discussions are confidential.

A settlement would end the legal battle between Dauman and Redstone in Massachusetts over the CEO's removal from National Amusements Inc, the privately held company that holds Redstone's Viacom and CBS Corp <CBS.N> voting shares, as well as the trust that will determine the fate of both media companies when the 93-year-old dies or is deemed mentally incapacitated.

Spokesmen for Viacom and National Amusements declined to comment.

Sumner Redstone in May removed Dauman and Viacom board member George Abrams from the Sumner M. Redstone National Amusements Inc Trust. A spokesman for Redstone said the media mogul had been unhappy with the company's performance and about Dauman's plans to sell a stake in Paramount Pictures.

Dauman and Abrams shot back with their own lawsuit to prevent their removal from the trust, arguing that Redstone was being manipulated by his daughter, Shari. Shari Redstone called the allegation "absurd" and said her father made his own decisions.

Redstone also moved to kick Dauman and four other directors off the board in June, sparking litigation in Delaware to block the attempt.

Settlement talks have been on and off for the past few weeks, sources have told Reuters. Terms that have been discussed include that Dauman would be replaced by Viacom Chief Operating Officer Tom Dooley, the sources, who are familiar with the situation, said. Another area of negotiation has been around whether to allow Dauman to present to the board his plan to sell a stake in Paramount Pictures in exchange for his exit, the sources said.

(Reporting by Jessica Toonkel; Editing by James Dalgleish)