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                                                                 Exhibit 10.56

                                     TIER I
                               SEVERANCE AGREEMENT


                  THIS AGREEMENT, dated August 14, 2000 (the "Effective Date"),
is made by and between Starwood Hotels and Resorts Worldwide, Inc., a Maryland
corporation (the "Company"), and Robert F. Cotter (the "Executive").

                  WHEREAS, the Executive is employed by the Company as Chief
Operating Officer; and

                  WHEREAS, the Company considers it essential to the best
interests of its stockholders to foster the continued employment of key
management personnel; and

                  WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of senior
management personnel to the detriment of the Company and its stockholders; and

                  WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's senior management, including the
Executive, to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from the possibility of a Change in
Control.

                  NOW, THEREFORE, the Company and the Executive hereby agree as
follows:

         1. Defined Terms. The definitions of capitalized terms used in this
Agreement are provided in the last Section hereof.

         2. Term of Agreement. The Term of this Agreement shall commence on the
Effective Date and shall continue in effect through the third anniversary of the
Effective Date; provided, however, that on each anniversary of the Effective
Date during the Term of this Agreement, the Term shall automatically be extended
for one additional year unless, not later than 90 days prior to any such
anniversary, the Company or the Executive shall have given notice not to extend
the Term; and further provided, however, that if a Change in Control or a
Potential Change in Control shall have occurred during the Term, the Term shall
expire no earlier than twenty-four (24) months beyond the month in which such
Change in Control or a Potential Change in Control occurred.

         3. Company's Covenants Summarized. In order to induce the Executive to
remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions
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described herein, to pay the Executive the Severance Payments and the other
payments and benefits described herein. Except as provided in Section 10 hereof,
no Severance Payments shall be payable under this Agreement unless during the
Term there shall have been (or, under the terms of the second sentence of
Section 6 hereof, there shall be deemed to have been) a termination of the
Executive's employment with the Company following a Change in Control. This
Agreement shall not be construed as creating an express or implied contract of
employment and, except as otherwise agreed in writing between the Executive and
the Company, the Executive shall not have any right to be retained in the employ
of the Company.

         4. The Executive's Covenants. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event a Potential Change in
Control occurs during the Term, the Executive will remain in the employ of the
Company until the earliest of (i) a date which is six (6) months from the date
of such Potential Change of Control, (ii) the date of a Change in Control, (iii)
the date of termination by the Executive of the Executive's employment for Good
Reason or by reason of death, Disability or Retirement, or (iv) the termination
by the Company of the Executive's employment for any reason.

         5. Compensation Other Than Severance Payments.

                  a. Payment of Salary During Disability. Following a Change in
Control and during the Term, during any period that the Executive is unable to
perform the Executive's full-time duties with the Company as a result of
incapacity due to physical or mental illness, the Company shall pay to the
Executive the full salary to which the Executive is entitled at the rate in
effect at the commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any compensation or
benefit plan, program or arrangement maintained by the Company during such
period, until the Executive's employment is terminated by the Company for
Disability.

                  b. Accrued Salary. If the Executive's employment shall be
terminated for any reason following a Change in Control and during the Term, the
Company shall pay to the Executive such Executive's full salary through the Date
of Termination at the rate in effect immediately prior to the Date of
Termination or, if higher, the rate in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, together with
all compensation and benefits payable to the Executive through the Date of
Termination under the terms of the Company's compensation and benefit plans,
programs or arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect immediately
prior to the first occurrence of an event or circumstance constituting Good
Reason.

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                  c. Post-Termination Benefits. If the Executive's employment
shall be terminated for any reason following a Change in Control and during the
Term, the Company shall pay to the Executive the Executive's normal
post-termination compensation and benefits as such payments become due. Such
post-termination compensation and benefits shall be determined under, and paid
in accordance with, the Company's retirement, insurance and other compensation
or benefit plans, programs and arrangements as in effect immediately prior to
the Date of Termination or, if more favorable to the Executive, as in effect
immediately prior to the occurrence of the first event or circumstance
constituting Good Reason.

         6. Severance Payments.

                  a. If (i) the Executive's employment is terminated following a
Change in Control and during the Term, other than (A) by the Company for Cause,
(B) by reason of death or Disability, or (C) by the Executive without Good
Reason, or (ii) the Executive voluntarily terminates his employment for any
reason during the one-month period commencing twelve (12) months following a
Change in Control, then, in either such case, the Company shall pay the
Executive the amounts, and provide the Executive the benefits, described in this
Section 6 ("Severance Payments") and Section 7, in addition to any payments and
benefits to which the Executive is entitled under Section 5 hereof. For purposes
of this Agreement, the Executive's employment shall be deemed to have been
terminated following a Change in Control by the Company without Cause or by the
Executive with Good Reason, if (i) the Executive's employment is terminated by
the Company without Cause prior to a Change in Control (whether or not a Change
in Control ever occurs) and such termination was at the request or direction of
a Person who has entered into an agreement with the Company the consummation of
which would constitute a Change in Control (an "Acquiring Person"), (ii) the
Executive terminates his employment for Good Reason prior to a Change in Control
(whether or not a Change in Control ever occurs) and the circumstance or event
which constitutes Good Reason occurs at the request or direction of an Acquiring
Person, or (iii) the Executive's employment is terminated by the Company without
Cause or by the Executive for Good Reason and such termination or the
circumstance or event which constitutes Good Reason is otherwise in connection
with or in anticipation of a Change in Control (whether or not a Change in
Control ever occurs). For purposes of any determination regarding the
applicability of the immediately preceding sentence, any position taken by the
Executive shall be presumed to be correct unless the Company establishes to the
Board by clear and convincing evidence that such position is not correct.

                      (1) Lump Sum Payment. In lieu of any further salary
         payments to the Executive for periods subsequent to the Date of
         Termination and in lieu of any severance benefit otherwise payable to
         the Executive, the


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         Company shall pay to the Executive a lump sum severance payment, in
         cash, equal to three times the sum of (i) the Executive's base salary
         as in effect immediately prior to the Date of Termination or, if
         higher, in effect immediately prior to the first occurrence of an event
         or circumstance constituting Good Reason, and (ii) the average of the
         annual bonuses earned by the Executive in the three fiscal years ending
         immediately prior to the fiscal year in which occurs the Date of
         Termination or, if higher, immediately prior to the fiscal year in
         which occurs the first event or circumstance constituting Good Reason.
         For purposes of the preceding sentence, in determining any bonus amount
         for any fiscal year, bonuses paid with respect to any year in which
         employment of the Executive commenced shall be annualized based on the
         number of days employed by the Company during such year.

                      (2) Continuation of Welfare Benefits. For the twenty-four
         (24) month period immediately following the Date of Termination, the
         Company shall arrange to provide the Executive and his dependents life,
         disability, accident and health insurance benefits and other benefits
         and perquisites (including employee stay rates) substantially similar
         to those provided to the Executive and his dependents immediately prior
         to the Date of Termination or, if more favorable to the Executive,
         those provided to the Executive and his dependents immediately prior to
         the first occurrence of an event or circumstance constituting Good
         Reason, at no greater cost to the Executive than the cost to the
         Executive immediately prior to such date or occurrence. Benefits
         otherwise receivable by the Executive pursuant to this Section 6(a)(2)
         shall be reduced to the extent benefits of the same type are received
         by the Executive from another employer during the twenty-four (24)
         month period following the Executive's termination of employment;
         provided, however, that the Company shall reimburse the Executive for
         the excess, if any, of the cost of such benefits to the Executive over
         such cost immediately prior to the Date of Termination or, if more
         favorable to the Executive, the first occurrence of an event or
         circumstance constituting Good Reason.

                      (3) Incentive Compensation. Notwithstanding any provision
         of any annual or long-term incentive plan to the contrary, the Company
         shall pay to the Executive a lump sum amount, in cash, equal to the sum
         of (i) any unpaid incentive compensation which has been allocated or
         awarded to the Executive for a completed fiscal year or other measuring
         period preceding the Date of Termination under any such plan and which,
         as of the Date of Termination, is contingent only upon the continued
         employment of the Executive to a subsequent date, and (ii) the
         aggregate value of all contingent incentive compensation awards
         allocated or awarded


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         to the Executive for all then uncompleted periods under any such plan
         that the Executive would have earned on the last day of the performance
         award period, assuming the achievement, at the target level, of the
         individual and corporate performance goals established with respect to
         such award. Awards for uncompleted periods shall be based upon the
         number of days the Executive is employed by the Company during such
         year.

                      (4) Accelerated Vesting of Stock Options. All stock
         options and restricted stock held by the Executive under any stock
         option or incentive plan maintained by the Company (including the
         Company's 1995 and 1999 Long-Term Incentive Plans) shall immediately
         vest and become exercisable as of the Date of Termination, to be
         exercised in accordance with the terms of the applicable plan.

                      (5) Outplacement Services. The Company shall provide the
         Executive with outplacement services suitable to the Executive's
         position for a period of two (2) years or, if earlier, until the first
         acceptance by the Executive of an offer of employment. The cost of such
         outplacement services shall not exceed twenty percent (20%) of the
         Executive's base salary.

                      (6) Deferred Compensation. The Company shall pay the
         Executive a lump sum payment of any of the Executive's deferred
         compensation.

                      (7) 401(k) Contributions. All unvested 401(k)
         contributions in the Executive's 401(k) account shall immediately vest
         or the Company shall pay the Executive an amount equal to any such
         unvested amounts that are forfeited by reason of the Executive's
         termination of employment.

                      (8) Loans. The Company shall forgive in full any home or
         relocation loans from the Company to the Executive, identified on
         Schedule A hereto, that are outstanding as of the Date of Termination
         and execute and record any instruments and documents necessary or
         desirable to evidence the satisfaction in full of such loans and the
         release of any lien securing such loan. In addition, the Company shall
         pay to Executive an amount required, in the good faith estimate of
         Executive's tax advisor, to permit Executive to pay any income tax
         incurred by Executive as a result of such loan forgiveness and the
         payment of such additional amounts by the Company.

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         7. 280G Gross Up Payments.

                  a. Whether or not the Executive becomes entitled to the
Severance Payments, if any of the payments or benefits received or to be
received by the Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or any Person affiliated with
the Company or such Person) (such payments or benefits, excluding the Gross-Up
Payment, being hereinafter referred to as the "Total Payments") will be subject
to the Excise Tax, the Company shall pay to the Executive an additional amount
(the "Gross-Up Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Total Payments and any federal, state
and local income and employment taxes and Excise Tax upon the Gross-Up Payment,
shall be equal to the Total Payments.

                  b. For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of any such Excise
Tax, (i) all of the Total Payments shall be treated as "parachute payments"
(within the meaning of section 280G(b)(2) of the Code) unless tax counsel ("Tax
Counsel") reasonably acceptable to the Executive and selected by the accounting
firm which was, immediately prior to the Change in Control, the Company's
independent auditor (the "Auditor"), delivers an opinion to the Executive that
such payments or benefits (in whole or in part) do not constitute parachute
payments, including by reason of section 280G(b)(4)(A) of the Code, (ii) all
"excess parachute payments" within the meaning of section 280G(b)(l) of the Code
shall be treated as subject to the Excise Tax unless Tax Counsel delivers an
opinion to the Executive that such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually rendered (within
the meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount
allocable to such reasonable compensation, or are otherwise not subject to the
Excise Tax, and (iii) the value of any noncash benefits or any deferred payment
or benefit shall be determined by the Auditor in accordance with the principles
of sections 280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, the Executive shall be deemed to pay federal
income tax at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the state and locality
of the Executive's residence on the Date of Termination (or if there is no Date
of Termination, then the date on which the Gross-Up Payment is calculated for
purposes of this Section 7), net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes.

                  c. In the event that the Excise Tax is finally determined to
be less than the amount taken into account hereunder in calculating the Gross-Up
Payment,


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the Executive shall repay to the Company, within five (5) business days
following the time that the amount of such reduction in the Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income and employment taxes imposed on the
Gross-Up Payment being repaid by the Executive, to the extent that such
repayment results in a reduction in the Excise Tax and a dollar-for-dollar
reduction in the Executive's taxable income and wages for purposes of federal,
state and local income and employment taxes, plus interest on the amount of such
repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code. In
the event that the Excise Tax is determined, pursuant to an administrative or
judicial proceeding, to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) within five (5) business days following the time
that the amount of such excess is finally determined. The Executive and the
Company shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.

                  d. Timing of Payments. The payments provided in subsections
(1) and (3) of Section 6 hereof and in Section 7 hereof shall be made not later
than the fifth day following the Date of Termination; provided, however, that if
the amounts of such payments cannot be finally determined on or before such day,
the Company shall pay to the Executive on such day an estimate, as determined in
good faith by the Executive or, in the case of payments under Section 7 hereof,
in accordance with Section 7 hereof, of the minimum amount of such payments to
which the Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder (or on all such
payments to the extent the Company fails to make such payments when due) at 120%
of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth (30th) day
after the Date of Termination. At the time that payments are made under this
Agreement, the Company shall provide the Executive with a written statement
setting forth the manner in which such payments were calculated and the basis
for such calculations including, without limitation, any opinions or other
advice the Company has received from Tax Counsel, the Auditor or other advisors
or consultants (and any such opinions or advice which are in writing shall be
attached to the statement).

                  e. Legal Fees. The Company also shall pay to the Executive, as
incurred, all legal fees and expenses incurred by the Executive in disputing in
good faith any issue hereunder relating to the termination of the Executive's
employment,


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in seeking to obtain or enforce any benefit or right provided by this Agreement
or in connection with any tax audit or proceeding to the extent attributable to
the application of section 4999 of the Code to any payment or benefit provided
hereunder, unless it is determined that any such dispute or other action is
frivolous and not in good faith. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.

         8. Termination Procedures and Compensation During Dispute.

                  a. Notice of Termination. After a Change in Control and during
the Term, any purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with Section 12 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause is required
to include a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.

                  b. Date of Termination. "Date of Termination," with respect to
any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given).

                  c. Dispute Concerning Termination. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 8(c)), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the


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termination, the Date of Termination shall be extended until the earlier of (i)
the date on which the Term ends or (ii) the date on which the dispute is finally
resolved, either by mutual written agreement of the parties or by a final
judgment, order or decree of an arbitrator or a court of competent jurisdiction
(which is not appealable or with respect to which the time for appeal therefrom
has expired and no appeal has been perfected); provided, however, that the Date
of Termination shall be extended by a notice of dispute given by the Executive
only if such notice is given in good faith and the Executive pursues the
resolution of such dispute with reasonable diligence.

                  d. Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 8(c) hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the notice
giving rise to the dispute was given, until the Date of Termination, as
determined in accordance with Section 8(c) hereof. Amounts paid under this
Section 8(d) are in addition to all other amounts due under this Agreement
(other than those due under Section 5(b) hereof) and shall not be offset against
or reduce any other amounts due under this Agreement.

         9. No Mitigation. The Company agrees that, if the Executive's
employment with the Company terminates during the Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by the Company pursuant to Section 6 hereof or Section
8(d) hereof. Further, the amount of any payment or benefit provided for in this
Agreement (other than Section 6(a)(2) hereof) shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.

         10. Successors; Binding Agreement.

                  a. In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on


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the same terms as the Executive would be entitled to hereunder if the Executive
were to terminate the Executive's employment for Good Reason after a Change in
Control, except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination.

                  b. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death of
the Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate.

         11. Indemnification. The Company shall indemnify and hold Executive
harmless for acts and omissions in his capacity as an officer, director or
employee of the Company to the maximum extent permitted under applicable law.
The Company shall maintain a Director's and Officer's Liability Insurance
Policy, which shall provide liability coverage for Executive's benefit, and the
Executive shall remain covered under such policy for a period of at least six
(6) years following the earlier of termination of employment or the occurrence
of a Change in Control.

         12. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to the
Executive, to the address inserted below the Executive's signature on the final
page hereof and, if to the Company, to the address set forth below, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon actual receipt:

                           To the Company:

                           Starwood Hotels and Resorts Worldwide, Inc.
                           777 Westchester Avenue
                           White Plains, NY  10604
                           Attention:  General Counsel

         13. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach


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by the other party hereto of, or of any lack of compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. This Agreement supersedes any other agreements
or representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party; provided, however,
that this Agreement shall supersede any agreement setting forth the terms and
conditions of the Executive's employment with the Company only in the event that
the Executive's employment with the Company is terminated on or following a
Change in Control, by the Company other than for Cause or by the Executive other
than for Good Reason. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of New York. All
references to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the Executive under
this Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without limitation,
those under Sections 6, 7, 8, and 9 hereof) shall survive such expiration.

         14. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

         15. Settlement of Disputes; Arbitration.

                  a. All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Board and shall be in
writing. Any denial by the Board of a claim for benefits under this Agreement
shall be delivered to the Executive in writing and shall set forth the specific
reasons for the denial and the specific provisions of this Agreement relied
upon. The Board shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim and shall further allow the Executive to
appeal to the Board a decision of the Board within sixty (60) days after
notification by the Board that the Executive's claim has been denied.

                  b. Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
New York, in accordance with the rules of the American Arbitration Association
then in effect; provided, however, that the evidentiary standards set forth in
this Agreement shall apply. Judgment may be entered on the arbitrator's award in
any court having jurisdiction. Notwithstanding any provision of this Agreement
to the contrary, the


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Executive shall be entitled to seek specific performance of the Executive's
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.

         16. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:

                  a. "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.

                  b. "Auditor" shall have the meaning set forth in Section 7
hereof.

                  c. "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.

                  d. "Beneficial Owner" shall have the meaning set forth in Rule
13d-3 under the Exchange Act.

                  e. "Board" shall mean the Board of Directors of the Company.

                  f. "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company after a written
demand for substantial performance is delivered to the Executive by the Board,
which demand specifically identifies the manner in which the Board believes that
the Executive has not substantially performed the Executive's duties, and
Executive has not cured any such failure that is capable of being cured in all
material respects within ten (10) days of receiving such written demand, or (ii)
the willful engaging by the Executive in conduct which is demonstrably and
materially injurious to the Company or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no act,
or failure to act, on the Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive's act, or failure to act, was in the best
interest of the Company and (y) in the event of a dispute concerning the
application of this provision, no claim by the Company that Cause exists shall
be given effect unless the Company establishes to the Board by clear and
convincing evidence that Cause exists.

                  g. A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:

                      (1) any Person is or becomes the Beneficial Owner,
         directly or indirectly, of securities of the Company (not including in
         the securities beneficially owned by such Person any securities
         acquired directly


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         from the Company or its affiliates) representing 25% or more of the
         combined voting power of the Company's then outstanding securities,
         excluding any Person who becomes such a Beneficial Owner in connection
         with a transaction described in clause (i) of paragraph (3) below; or

                      (2) the following individuals cease for any reason to
         constitute a majority of the number of directors then serving:
         individuals who, on the date hereof, constitute the Board and any new
         director (other than a director whose initial assumption of office is
         in connection with an actual or threatened election contest, including
         but not limited to a consent solicitation, relating to the election of
         directors of the Company) whose appointment or election by the Board or
         nomination for election by the Company's stockholders was approved or
         recommended by a vote of at least two-thirds (2/3) of the directors
         then still in office who either were directors on the date hereof or
         whose appointment, election or nomination for election was previously
         so approved or recommended; or

                      (3) there is consummated a merger or consolidation of the
         Company or any direct or indirect subsidiary of the Company with any
         other corporation, other than (i) a merger or consolidation which would
         result in the voting securities of the Company outstanding immediately
         prior to such merger or consolidation continuing to represent (either
         by remaining outstanding or by being converted into voting securities
         of the surviving entity or any parent thereof), in combination with the
         ownership of any trustee or other fiduciary holding securities under an
         employee benefit plan of the Company or any subsidiary of the Company,
         at least 70% of the combined voting power of the securities of the
         Company or such surviving entity or any parent thereof outstanding
         immediately after such merger or consolidation and in proportion to
         their relative voting power immediately prior to such merger or
         consolidation, or (ii) a merger or consolidation effected to implement
         a recapitalization of the Company (or similar transaction) in which no
         Person is or becomes the Beneficial Owner, directly or indirectly, of
         securities of the Company representing 25% or more of the combined
         voting power of the Company's then outstanding securities; or

                      (4) the stockholders of the Company approve a plan of
         complete liquidation or dissolution of the Company or there is
         consummated an agreement for the sale or disposition by the Company of
         all or substantially all of the Company's assets, other than a sale or
         disposition by the Company of all or substantially all of the Company's
         assets to an entity, at least 70% of the combined voting power of the
         voting securities of which are owned by stockholders of the Company in
         substantially the same proportions as their ownership of the Company
         immediately prior to such sale.


                                       13
<PAGE>   14
         Notwithstanding the foregoing, a "Change in Control" shall not be
         deemed to have occurred by virtue of the consummation of any
         transaction or series of integrated transactions immediately following
         which the record holders of the common stock of the Company immediately
         prior to such transaction or series of transactions continue to have
         substantially the same proportionate ownership in an entity which owns
         all or substantially all of the assets of the Company immediately
         following such transaction or series of transactions.

                  h. "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

                  i. "Company" shall mean Starwood Hotels and Resorts Worldwide,
Inc., and, except in determining under Section 17(g) hereof whether or not any
Change in Control of the Company has occurred, shall include any successor to
its business and/or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

                  j. "Date of Termination" shall have the meaning set forth in
Section 8 hereof.

                  k. "Disability" shall be deemed the reason for the termination
by the Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.

                  l. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.

                  m. "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.

                  n. "Executive" shall mean the individual named in the first
paragraph of this Agreement.

                  o. "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6(a) hereof (treating all references in paragraphs
(1) through (7) below to a "Change in Control" as references to a "Potential
Change in Control"), of any one of the


                                       14
<PAGE>   15
following acts by the Company, or failures by the Company to act, unless, in the
case of any act or failure to act described in paragraph (1), (5), (6) or (7)
below, such act or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:

                      (1) the assignment to the Executive of any duties
         inconsistent with the Executive's status as a senior executive officer
         of the Company or a substantial adverse alteration in the nature or
         status of the Executive's responsibilities from those in effect
         immediately prior to the Change in Control;

                      (2) a reduction by the Company in the Executive's annual
         base salary as in effect on the date hereof or as the same may be
         increased from time to time;

                      (3) the relocation of the Executive's principal place of
         employment to a location more than 35 miles from the Executive's
         principal place of employment immediately prior to the Change in
         Control or the Company's requiring the Executive to be based anywhere
         other than such principal place of employment (or permitted relocation
         thereof) except for required travel on the Company's business to an
         extent substantially consistent with the Executive's present business
         travel obligations;

                      (4) the failure by the Company to pay to the Executive any
         portion of the Executive's current compensation, or to pay to the
         Executive any portion of an installment of deferred compensation under
         any deferred compensation program of the Company, within seven (7) days
         of the date such compensation is due;

                      (5) the failure by the Company to continue in effect any
         compensation plan in which the Executive participates immediately prior
         to the Change in Control which is material to the Executive's total
         compensation, including but not limited to the Company's stock option,
         bonus and other plans or any substitute plans adopted prior to the
         Change in Control, unless an equitable arrangement (embodied in an
         ongoing substitute or alternative plan) has been made with respect to
         such plan, or the failure by the Company to continue the Executive's
         participation therein (or in such substitute or alternative plan) on a
         basis not materially less favorable, both in terms of the amount or
         timing of payment of benefits provided and the level of the Executive's
         participation relative to other participants, as existed immediately
         prior to the Change in Control;

                                       15
<PAGE>   16
                      (6) the failure by the Company to continue to provide the
         Executive with benefits substantially similar to those enjoyed by the
         Executive under any of the Company's pension, savings, life insurance,
         medical, health and accident, or disability plans in which the
         Executive was participating immediately prior to the Change in Control,
         the taking of any other action by the Company which would directly or
         indirectly materially reduce any of such benefits or deprive the
         Executive of any material fringe benefit enjoyed by the Executive at
         the time of the Change in Control, or the failure by the Company to
         provide the Executive with the number of paid vacation days to which
         the Executive is entitled on the basis of years of service with the
         Company in accordance with the Company's normal vacation policy or any
         employment agreement in effect at the time of the Change in Control; or

                      (7) any purported termination of the Executive's
         employment which is not effected pursuant to a Notice of Termination
         satisfying the requirements of Section 8(a) hereof; for purposes of
         this Agreement, no such purported termination shall be effective.

                  The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or failure
to act constituting Good Reason hereunder.

                  For purposes of any determination regarding the existence of
Good Reason, any claim by the Executive that Good Reason exists shall be
presumed to be correct unless the Company establishes to the Board by clear and
convincing evidence that Good Reason does not exist.

                  p. "Gross-Up Payment" shall have the meaning set forth in
Section 7 hereof.

                  q. "Notice of Termination" shall have the meaning set forth in
Section 8 hereof.

                  r. "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or


                                       16
<PAGE>   17
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.

                  s. "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:

                      (1) the Company enters into an agreement, the consummation
         of which would result in the occurrence of a Change in Control;

                      (2) the Company or any Person publicly announces an
         intention to take or to consider taking actions which, if consummated,
         would constitute a Change in Control;

                      (3) any Person becomes the Beneficial Owner, directly or
         indirectly, of securities of the Company representing 15% or more of
         either the then outstanding shares of common stock of the Company or
         the combined voting power of the Company's then outstanding securities
         (not including in the securities beneficially owned by such Person any
         securities acquired directly from the Company or its affiliates); or

                      (4) the Board adopts a resolution to the effect that, for
         purposes of this Agreement, a Potential Change in Control has occurred.

                  t. "Retirement" shall be deemed the reason for the termination
by the Executive of the Executive's employment if such employment is terminated
in accordance with the Company's retirement policy, including early retirement,
generally applicable to its salaried employees.

                  u. "Severance Payments" shall have the meaning set forth in
Section 6 hereof.

                  v. "Tax Counsel" shall have the meaning set forth in Section 7
hereof.

                  w. "Term" shall mean the period of time described in Section 2
hereof (including any extension, continuation or termination described therein).

                  x. "Total Payments" shall mean those payments so described in
Section 7 hereof.

                                       17
<PAGE>   18
                         STARWOOD HOTELS AND RESORTS
                           WORLDWIDE, INC.

                         By:  /s/ David K. Norton
                            ----------------------------------------------------
                         Name:    David K. Norton
                         Title:   Executive Vice President-Human Resources



                         EXECUTIVE


                             /s/ Robert F. Cotter
                         -----------------------------------
                                 Robert F. Cotter


                         Address:

                         -----------------------------------

                         -----------------------------------

                         -----------------------------------
                             (Please print carefully)



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