In 3-quart heavy saucepan, cook sugar and water over medium-low heat, stirring often, until sugar is dissolved. Increase heat to medium-high; boil gently, without stirring, about 8 minutes, until syrup turns a deep amber color, occasionally brushing down sides of pan with wet pastry brush and swirling pan. (Swirling the pan, instead of stirring, promotes more even cooking.) Gradually add whipping cream (sauce will bubble vigorously). Add 1/3 cup butter; stir gently until smooth. Remove from heat; stir in vanilla. Set aside.