(PAGE)                   GUARANTY


     THIS GUARANTY AGREEMENT (this "Agreement") is made as of
December 30, 1997, by and between EQUUS MANAGEMENT COMPANY, a
Delaware corporation ("EMC"), and INTERSTATE GENERAL COMPANY,
L.P., a Delaware limited partnership (the "Guarantor" of
"IGC").

     WHEREAS, EMC is the managing general partner of Equus
Gaming Company L.P. (the "Partnership") and the Guarantor is a
general partner of the Partnership;

     WHEREAS, the Partnership is a publicly traded partnership
which is listed on the Nasdaq Market ("Nasdaq");

     WHEREAS, Nasdaq approved the listing of the Partnership's
Class A Limited Partnership Stock Units ("Units") on Nasdaq on
the condition that the Guarantor retain certain liability with
respect to the debts of the Partnership; 

     WHEREAS, pursuant to a Stock Purchase Agreement dated as
of December 31, 1996, (the "EMC Purchase Agreement") IGC sold
all of the outstanding capital stock of EMC to Interstate
Business Corporation, a Delaware Corporation ("IBC");

     WHEREAS, pursuant to the EMC Purchase Agreement, IBC
agreed to use its best efforts to permit IGC to withdraw as a
general partner of the Partnership without affecting the
continued listing of Units on Nasdaq;

     WHEREAS, in connection with the foregoing obligation, IBC
has contributed certain assets to EMC to increase its net
tangible assets and EMC has caused the Partnership to redeem
IGC's general partnership interest pursuant to a Redemption
Agreement between the Partnership and IGC of even date;

     WHEREAS, as partial inducement to EMC to cause the
Partnership to enter into the Redemption Agreement, the
Guarantor has agreed to provide the guaranty provided
hereunder; and

     WHEREAS, the Guarantor has determined that the Redemption
Agreement will result in direct and/or indirect financial
benefits to the Guarantor and is otherwise in Guarantor's
interest;
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     NOW THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:

     1.   Guaranty.  The Guarantor for itself, its successors
and assigns, guarantees to EMC (the "Guaranty"):
          (a)  in the case of the insolvency of the
Partnership and the insolvency of EMC, the payment of any and
all liabilities of EMC which exceed the assets of EMC, arising
from EMC's status as a general partner of the Partnership (the
"Liabilities"), provided, however, that 

               (i) the Guarantor shall pay only that portion
of the Liabilities which exceed Two Hundred Thousand Dollars
(US $200,000.00);  and 

               (ii) Notwithstanding any other provision of
this Agreement, the Guarantor shall not be required to pay
more than Twenty Million Dollars (U.S. $20,000,000.00)
pursuant to this Guaranty.  

     2.   Nasdaq Listing.  Upon the execution of this
Agreement, EMC shall use its best efforts to obtain, as soon
as reasonably practical, the approval of Nasdaq to continue
listing the Units without relying on this Guaranty.

     3.   Termination.   

          (a)  Guarantor may elect to terminate the Guaranty
by written notice to EMC upon the occurrence of any one of the
following events:

               (i)  Nasdaq confirms the Partnership that
Nasdaq will continue the listing of the Units of this
Guaranty; 

               (ii) The consolidated partners' equity of the
Partnership, as determined in accordance with generally
accepted accounting principles falls below negative Twenty
Million Dollars (US $20,000,000.00); or

               (iii)  Ten (10) days following delivery of
written notice to EMC of non payment when due of the fee set
forth in Section 4 hereof, unless such payment is made before
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the expiration of the ten (10) days.  

          (b)  EMC May elect to terminate the Guaranty at any
time upon written notice to Guarantor.  

     4.   Guaranty Fee.    If this Guaranty has not terminated
by the fourth anniversary of its inception, then beginning on
the fourth anniversary of this Guaranty and on each
anniversary thereafter until this Guaranty is terminated, EMC
shall cause the Partnership to pay to the Guarantor, a fee
equal to 2% of the amount by which the Consolidated partners'
equity is less than Four Million Dollars ($4,000,000.00).

     5.   Representations and Warranties.  The Guarantor
represents and warrants to EMC, effective as of the date of
the execution by the Guarantor of this Agreement, that:

          (a)  Good Standing.  The Guarantor is a limited
partnership duly organized, validly existing and in good
standing, under the laws of the State of Delaware and has the
power and authority to own its property and to carry on its
business and is duly qualified or registered in each
jurisdiction in which the character of the properties owned by
it therein or in which the transaction of its business makes
such qualification necessary.

          (b)  Authority.  The Guarantor has full power and
authority to execute and deliver this Agreement and to incur
the obligations provided for herein, all of which have been
duly authorized by all proper and necessary action of its
managing general partner.  No consent or approval of any
public authority is required as a condition to the validity of
this Agreement.

          (c)  Binding Agreement.  This Agreement constitutes
the valid and legally binding obligation of the Guarantor in
accordance with its terms.

          (d)  No Conflicts.  None of the execution, delivery
or performance of this Agreement will violate (i) any
provision of law or of the partnership agreement of the
Guarantor, or any order of any court or other agency of
government to which the Guarantor or any affiliate thereof is
subject, or (ii) any indenture, agreement or other instrument
to which the Guarantor is a party or by which any of the
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property or assets of the Guarantor is bound, or be in
conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the property or assets of
the Guarantor.

     6.   Waivers.  Except as expressly set forth below, the
Guarantor hereby waives notice of the following acts, events
and/or conditions and hereby agrees that the creation or
existence of any such act, event or condition or the
performance thereof by the Partnership (in any number of
instances) shall in no way release or discharge the Guarantor
from liability hereunder, in whole or in part:

          (a)  the addition of or partial or entire release of
any other guarantor, maker, surety, endorser, indemnitor or
other party or parties primarily or secondarily liable for the
payment of the Liabilities;
          (b)  the institution of any suit or the obtaining of
any judgment against any other guarantor, maker, surety,
endorser, indemnitor or other party primarily or secondarily
liable for the payment of the Liabilities;

          (c)  acceptance of this Guaranty;

          (d)  all rights to require the marshalling of assets
of the Partnership or any party or parties and all rights
accorded by law to the Guarantor which might impair the right
of action against the Guarantor;

          (e)  the taking or retaining of the primary or
secondary obligation of any party or parties, in addition to
the Guarantor, with respect to the Liabilities;

          (f)  the taking or retaining of a lien and security
interest in any property to secure the Liabilities or any of
the liabilities of the Guarantor hereunder or the impairment
of any collateral therefor, including, without limitation, the
substitution, exchange, surrender or release thereof,

          (g)  the failure of the Partnership at any time or
times to assert any claim or demand or to enforce any right or
remedy against EMC, or any other person or entity; or
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          (h)  any lack of validity of the Redemption
Agreement.

     7.   Conditional Guaranty.  The Guaranty is a conditional
guaranty on the terms and conditions set forth herein.  It
guarantees the performance of EMC as a general partner and it
is conditioned upon the requirement that the Partnership first
attempt to collect any of its liabilities from the assets of
EMC.  Payments by the Guarantor hereunder are immediately due
and payable upon the insolvency of EMC.  Any such payments may
be required by EMC in any number of installments, and shall
remain in full force and effect until satisfaction in full of
the Liabilities, notwithstanding any intermediate or temporary
payment or settlement of the whole or any part of the
Liabilities.

     8.   Notices.  All notices and other communications
provided for hereunder shall be in writing (including
telegraphic communication) and mailed by certified mail,
return receipt requested, or delivered by overnight delivery,
or telegraphed or deliver if to the Guarantor or to EMC, at
their address at 222 Smallwood Village Center, Waldorf,
Maryland 20602, or sent by telecopier (telecopier number (301)
870-8481), as to each party, at such other address as shall be
designated by such party in a written notice to the other
party.  All such notices and communications shall, when
mailed, be effective on the date received as indicated in the
receipt and, when sent by overnight delivery or telecopier or
telegraphed, be effective when delivered to the overnight
delivery service company or when sent by telecopier or
telegraph, respectively, addressed as aforesaid.

     9.   Successors and Assigns.  All obligations, covenants
and agreements of the Guarantor shall be binding on it and its
successors and assigns.

     10.  No Delay or Waiver Severability.  No delay on the 
part of EMC in the exercise of any right or remedy shall
operate as a waiver thereof, and no single exercise by EMC of
any right or remedy shall preclude other or further exercise
thereof or the exercise of any right or remedy; no waiver by
EMC of any right or remedy shall be effective unless in
writing nor, in any event, operate as a waiver of any other or
future right or remedy that may accrue to EMC.  If any part of
this Guaranty shall be adjudged invalid, then such partial
(PAGE)
invalidity shall not cause the remainder of the Guaranty to be
or to become invalid, and if a provision hereof is held
invalid in one or more of its applications, it is agreed that
said provision shall remain in effect in valid applications
that are severable from the invalid application or
applications.

     11.  Governing Law.  This Agreement shall be construed
under the laws of the Commonwealth of Virginia (excluding the
conflicts of laws principles thereof).

          IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.


                    INTERSTATE GENERAL COMPANY, L.P.

                    By:  Interstate General Management
                         Corporation
                    Its: Managing General Partner

                    By:  /s/ Francisco Arrivi
                         ---------------------------------
                    Name:  Francisco Arrivi
                           -------------------------------
                    Title: Executive Vice President
                           -------------------------------



                    EQUUS GAMING COMPANY, L.P.

                    By:  Equus Management Company
                    Its: Managing General Partner

                    By:  /s/ Gretchen Gronau
                         ---------------------------------
                    Name:  Gretchen Gronau
                           -------------------------------
                    Title: Vice President
                           -------------------------------