ALLEGRO NEW MEDIA, INC.

                 OUTSIDE DIRECTOR AND ADVISOR STOCK OPTION PLAN
                      (As amended through February 4, 1997)


     1.  Purpose.  Allegro New Media,  Inc.  (the  "Company")  hereby adopts the
Allegro New Media,  Inc.  Outside  Director  and Advisor  Stock Option Plan (the
"Plan"). The Plan is intended to recognize the contributions made to the Company
by the  non-employee  members of the Board of Directors and Board of Advisors of
the Company or an  Affiliate  (as defined  below),  to provide such persons with
additional  incentive to devote  themselves to the future success of the Company
or an  Affiliate,  and to improve the ability of the Company or an  Affiliate to
attract,  retain,  and motivate  individuals  upon whom the Company's  sustained
growth  and  financial  success  depend,  by  providing  such  persons  with  an
opportunity  to acquire or increase  their  proprietary  interest in the Company
through  receipt of options to purchase the Company's  Common  Stock,  par value
$.001 per share (the "Common Stock").


     2.  Definitions.  Unless  the  context  clearly  indicates  otherwise,  the
following terms shall have the following meanings:

     (a)"Affiliate"  means a  corporation  which  is a parent  corporation  or a
subsidiary corporation with respect to the Company within the meaning of Section
424(e) or (f) of the Code.

     (b)"Board  of  Directors"  or "Board"  means the Board of  Directors or the
Board of Advisors of the Company.

     (c)"Change in Control"  shall have the meaning as set forth in Section 9 of
the Plan.

     (d)"Code" means the Internal Revenue Code of 1986, as amended.

     (e)"Committee" shall have the meaning set forth in Section 3 of the Plan.

     (f)"Company" means Allegro New Media, Inc., a Delaware corporation.

     (g)"Disability" shall have the meaning set forth in Section 22(e)(3) of the
Code.

     (h)"Fair  Market Value" shall have the meaning set forth in Subsection 8(c)
of the Plan.

     (i)"Non-qualified  Stock  Option"  means an Option  granted  under the Plan
which  is not  intended  to  qualify,  or  otherwise  does  not  qualify,  as an
"incentive stock option" within the meaning of Section 422(b) of the Code.

     (j)"Option" means a Non-qualified Stock Option granted under the Plan.

     (k)"Optionee"  means a person to whom an Option has been granted  under the
Plan, which Option has not been exercised and has not expired or terminated.

     (l)"Option Document" means the document described in Section 8 of the Plan,
as  applicable,  which  sets  forth the terms and  conditions  of each  grant of
Options.


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     (m)"Option  Price" means the price at which  Shares may be  purchased  upon
exercise of an Option, as calculated pursuant to Subsection 8(c) of the Plan.

     (n)"Outside Director" means a member of the Board of Directors or the Board
of  Advisors  of  the  Company  who  is not an  employee  of the  Company  or an
Affiliate.

     (o)"Rule 16b-3" means Rule 16b-3 promulgated under the Securities  Exchange
Act of 1934, as amended.

     (p)"Shares"  means the shares of Common Stock of the Company  which are the
subject of Options.


     3.  Administration of the Plan. The Plan shall be administered by the Board
of Directors of the Company;  however,  the Board of Directors  may  designate a
committee composed of two or more of its Directors to operate and administer the
Plan in its stead.

     (a)Meetings.  The Committee shall hold meetings at such times and places as
it may determine. Acts approved at a meeting by a majority of the members of the
Committee or acts approved in writing by the unanimous consent of the members of
the Committee shall be the valid acts of the Committee.

     (b)Administration.  The interpretation and construction by the Committee of
any  provisions  of the Plan or of any Option  granted  under it shall be final,
binding and conclusive.

     (c)  Exculpation.  No member of the Board of Directors  shall be personally
liable for  monetary  damages  for any action  taken or any  failure to take any
action in  connection  with the  administration  of the Plan or the  granting of
Options under the Plan,  provided that this  Subsection  3(c) shall not apply to
(i)  any  breach  of  such  member's  duty  of  loyalty  to the  Company  or its
stockholders,  (ii) acts or omissions not in good faith or involving intentional
misconduct  or a knowing  violation of law,  (iii) acts or omissions  that would
result in  liability  under  Section 174 of the General  Corporation  Law of the
State of Delaware,  as amended,  and (iv) any transaction  from which the member
derived an improper personal benefit.

     (d) Indemnification. Service on the Committee shall constitute service as a
member of the Board of Directors of the  Company.  Each member of the  Committee
shall be entitled  without  further act on his or her part to indemnity from the
Company to the fullest  extent  provided  by  applicable  law and the  Company's
Certificate of Incorporation and/or By-laws in connection with or arising out of
any action, suit or proceeding with respect to the administration of the Plan or
the granting of Options  thereunder in which he or she may be involved by reason
of his or her being or having been a member of the Committee,  whether or not he
or she  continues to be such member of the  Committee at the time of the action,
suit or proceeding.


     4. Grants under the Plan.  Grants under the Plan may only be in the form of
a Non-qualified Stock Option.


     5. Eligibility.  All Outside Directors shall be eligible to receive Options
hereunder.  The Committee,  in its sole discretion,  shall determine  whether an
individual is eligible to receive Options under the Plan.


     6. Shares Subject to Plan. The aggregate maximum number of Shares for which
Options may be granted pursuant to the Plan is five hundred thousand  (500,000),
subject to adjustment as provided in Section 10 of the Plan. The Shares shall be
issued from  authorized  and  unissued  Common  Stock or Common Stock held in or

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hereafter  acquired for the treasury of the Company.  If an Option terminates or
expires without having been fully exercised for any reason, the Shares for which
the Option was not  exercised  may again be the  subject of one or more  Options
granted pursuant to the Plan.


     7. Term of the Plan.  The Plan is effective as of August 2, 1995,  the date
on which it was adopted by the Board of  Directors,  subject to the  approval of
the Plan on or before  December  31,  1995 by a majority  of the votes cast at a
duly  called  meeting  of the  stockholders  at  which a quorum  representing  a
majority of all outstanding  voting stock of the Company is, either in person or
by  proxy,  present  and  voting.  If the Plan is not so  approved  on or before
December 31, 1995, all Options granted under the Plan shall be null and void. No
Option may be granted under the Plan after December 31, 2005.


     8. Option Documents and Terms.  Each Option granted under the Plan shall be
a  Non-qualified  Stock Option.  Options  granted  pursuant to the Plan shall be
evidenced by the Option  Documents in such form as the Committee shall from time
to time approve,  which Option Documents shall comply with and be subject to the
following  terms and  conditions  and such  other  terms and  conditions  as the
Committee  shall from time to time require which are not  inconsistent  with the
terms of the Plan.

     (a) Number of Option Shares. Each Option Document shall state the number of
Shares to which it pertains. An Optionee may receive more than one Option on the
terms and subject to the conditions and restrictions of the Plan.

     (b) Timing of Grants;  Number of Shares  Subject of Options.  Each  Outside
Director  shall be granted,  on the earlier of (i) August 1, 1995 or (ii) his or
her becoming an Outside  Director,  an Option to purchase  twenty five  thousand
(25,000) Shares.  Thereafter,  each Outside Director shall be granted  annually,
commencing on the first day of August,  1996 and on the first day of each August
thereafter, an Option to purchase ten thousand (10,000) Shares; provided that if
at the time of any grant of Options the number of Shares  reserved  for issuance
under this Plan is less than the number of Shares  underlying  the Options to be
granted pursuant to the terms hereof, then the number of Options granted to each
director shall be reduced proportionately.

     (c) Option Price. Each Option Document shall state the Option Price,  which
shall be equal to the Fair Market  Value of the Shares on the date the Option is
granted.  If the Common Stock is traded in a public market, then the Fair Market
Value per share shall be, if the Common Stock is listed on a national securities
exchange or included in the NASDAQ  National  Market System,  the average of the
last  reported  sale prices  thereof on the five (5) trading days  preceding the
date of grant, or if the Common Stock is not so listed or included,  the average
of the mean between the last reported  "bid" and "asked"  prices  thereof on the
five (5) trading days preceding the date of grant, as reported on NASDAQ, or, if
not so reported,  as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary  financial  reporting service,  as applicable and as the
Committee determines. If the Common Stock is not traded in a public market, then
the Fair Market Value  thereof  shall be determined by the Board of Directors or
the Committee.

     (d) Exercise.  Each Option shall be exercisable on the date of grant to the
extent of not more than  thirty-three  and  one-third  percent  (33-1/3%) of the
Shares granted. After the expiration of one (1) year from the date of grant, the
Option may be exercised to the extent of not more than  sixty-six and two-thirds
percent  (66-2/3%) of the Shares  granted,  and after the  expiration of two (2)
years from the date of grant,  the Option may be  exercised to the extent of not
more than one hundred percent (100%) of the shares  granted.  No Option shall be
deemed to have been  exercised  prior to the  receipt by the  Company of written
notice of such  exercise  and payment in full of the Option Price for the shares
to be  purchased.  Each such  notice  shall  specify  the number of Shares to be
purchased   and  shall  (unless  the  Shares  are  covered  by  a  then  current
registration statement or a Notification under Regulation A under the Securities

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Act of 1933, as amended (the "Act")),  contain the Optionee's  acknowledgment in
form and  substance  satisfactory  to the Company that (a) such Shares are being
purchased  for  investment  and not for  distribution  or resale  (other  than a
distribution  or resale  which,  in the opinion of counsel  satisfactory  to the
Company, may be made without violating the registration  provisions of the Act),
(b) the Optionee has been advised and  understands  that (i) the Shares have not
been registered under the Act and are "restricted securities" within the meaning
of Rule 144 under the Act and are subject to  restrictions  on transfer and (ii)
the Company is under no  obligation  to register  the Shares under the Act or to
take any action which would make  available to the Optionee any  exemption  from
such  registration,  (c) such Shares may not be transferred  without  compliance
with all applicable  federal and state  securities  laws, and (d) an appropriate
legend  referring  to the  foregoing  restrictions  on  transfer  and any  other
restrictions  imposed  under  the  Option  Documents  may  be  endorsed  on  the
certificates.  Notwithstanding  the foregoing,  if the Company  determines  that
issuance of Shares should be delayed pending (A)  registration  under federal or
state  securities  laws, (B) the receipt of an opinion of counsel  acceptable to
the Company that an appropriate  exemption from such  registration is available,
(C) the  listing or  inclusion  of the Shares on any  securities  exchange or an
automated  quotation  system or (D) the consent or approval of any  governmental
regulatory  body whose consent or approval is necessary in  connection  with the
issuance of such Shares,  the Company may defer  exercise of any Option  granted
hereunder  until  any of the  events  described  in  this  Subsection  8(d)  has
occurred.

     (e) Medium of Payment.  An Optionee shall pay for Shares (i) in cash,  (ii)
by certified or cashier's check payable to the order of the Company, or (iii) by
such other  mode of payment as the  Committee  may  approve,  including  payment
through a broker in accordance with procedures  permitted by Regulation T of the
Federal Reserve Board. Without limiting the foregoing, the Committee may provide
an Option Document that payment may be made in whole or in part in shares of the
Company's  Common Stock. If payment is made in whole or in part in shares of the
Company's  Common  Stock,  then  the  Optionee  shall  deliver  to  the  Company
certificates  registered  in the name of such Optionee  representing  the shares
owned by such Optionee, free of all liens, claims and encumbrances of every kind
and having an  aggregate  Fair Market  Value on the date of delivery  that is at
least as great as the Option Price of the Shares (or relevant  portion  thereof)
with respect to which such Option is to be exercised by the payment in shares of
Common  Stock,  accompanied  by  stock  powers  duly  endorsed  in  blank by the
Optionee.  In the event that  certificates  for shares of the  Company's  Common
Stock  delivered  to the  Company  represent a number of shares in excess of the
number of shares required to make payment for the Option Price of the Shares (or
relevant  portion  thereof) with respect to which such Option is to be exercised
by  payment  in shares  of Common  Stock,  the stock  certificate  issued to the
Optionee shall represent (i) the Shares in respect of which payment is made, and
(ii) such excess number of shares.  Notwithstanding the foregoing, the Committee
may impose from time to time such  limitations  and  prohibitions  on the use of
shares of the Common Stock to exercise an Option as it deems appropriate.

     (f) Termination of Options. All Options granted pursuant to this Plan shall
be exercisable until the first to occur of the following:

          (i)   Expiration of ten (10) years from the date of grant;

          (ii)  Expiration  of three months   from  the  date  on  which  the
          Optionee's service as an Outside Director terminates for any reason 
          other than Disability or death; provided, however, that the Committee,
          in  its  sole  discretion, shall have the authority  to  extend the 
          expiration date of any or all outstanding  Options held by an Optionee
          whose service as an Outside Director terminates for any reason other
          than Disability or death beyond such three month period, but in no 
          event shall such extension of the expiration date of an Option be to
          a date beyond the tenth anniversary of the grant of such Option; or

          (iii) Expiration of one year from the date the Optionee's service with
          Company  as an  Outside Director terminates due  to  the  Optionee's
          Disability or death.


<PAGE>

     (g) Transfers. No option granted under the Plan may be transferred,  except
by will or by the laws of descent and  distribution.  During the lifetime of the
person to whom an Option is granted,  such Option may be exercised  only by such
person.  Notwithstanding  the  foregoing,  a  Non-qualified  Stock Option may be
transferred  pursuant to the terms of a "qualified  domestic  relations  order,"
within the meaning of Sections  401(a)(13)  and 414(p) of the Code or within the
meaning of Title I of the Employee  Retirement  Income  Security Act of 1974, as
amended.

     (h) Other  Provisions.  Subject to the  provisions of the Plan,  the Option
Documents shall contain such other  provisions  including,  without  limitation,
additional   restrictions   upon  the  exercise  of  the  Option  or  additional
limitations upon the term of the Option, as the Committee shall deem advisable.

     (i) Amendment.  Subject to the provisions of the Plan, the Committee  shall
have the right to amend Option Documents  issued to an Optionee,  subject to the
Optionee's  consent if such  amendment is not favorable to the Optionee,  except
that the consent of the Optionee  shall not be required for any  amendment  made
under Section 9 of the Plan, as applicable.


     9. Change in Control.  In the event of a Change in Control,  the  Committee
may take  whatever  action it deems  necessary or desirable  with respect to the
Options outstanding,  including, without limitation, accelerating the expiration
or termination date in the respective Option Documents to a date no earlier than
thirty (30) days after notice of such acceleration is given to the Optionees. In
addition to the foregoing, in the event of a Change in Control,  Options granted
pursuant to the Plan shall become immediately exercisable in full.

     A "Change in Control" shall be deemed to have occurred upon the earliest to
occur of the following events:  (i) the date the stockholders of the Company (or
the Board of Directors, if stockholder action is not required) approve a plan or
other arrangement pursuant to which the Company will be dissolved or liquidated,
or (ii) the date the stockholders of the Company (or the Board of Directors,  if
stockholder   action  is  not  required)  and  the  stockholders  of  the  other
constituent corporation (or its board of directors, if stockholder action is not
required)  have  approved a  definitive  agreement to merge or  consolidate  the
Company  with or into such other  corporation,  other than,  in either  case,  a
merger  or  consolidation  of the  Company  in which  holders  of  shares of the
Company's Common Stock  immediately  prior to the merger or  consolidation  will
hold at least a  majority  of the  ownership  of common  stock of the  surviving
corporation  (and,  if one class of common stock is not the only class of voting
securities  entitled  to vote on the  election  of  directors  of the  surviving
corporation,  a majority  of the  voting  power of the  surviving  corporation's
voting securities)  immediately after the merger or consolidation,  which common
stock (and if applicable voting securities) is to be held in the same proportion
as such holders' ownership of Common Stock of the Company immediately before the
merger or  consolidation,  or (iv) the date any entity,  person or group (within
the meaning of Section 13(d)(3) or Section  14(d)(2) of the Securities  Exchange
Act of 1934, as amended)  other than (A) the Company or any of its  subsidiaries
or any employee  benefit plan (or related trust)  sponsored or maintained by the
Company or any of its subsidiaries,  or (B) any person who, on the date the Plan
is effective,  shall have been the  beneficial  owner of or have voting  control
over shares of Common  Stock of the  Company,  possessing  more than ten percent
(10%) of the  aggregate  voting power of the  Company's  Common Stock shall have
become the beneficial owner of, or shall have obtained voting control over, more
than ten percent (10%) of the outstanding  shares of the Company's Common Stock,
or (v) the first day after the date this Plan is effective  when  directors  are
elected such that a majority of the Board of  Directors  shall have been members
of the Board of Directors for less than two (2) years, unless the nomination for
election of each new  director  who was not a director at the  beginning of such
two (2)  year  period  was  approved  by a vote of at  least  two-thirds  of the
directors  then  still in office who were  directors  at the  beginning  of such
period.


     10.  Adjustments  on Changes in  Capitalization.  The  aggregate  number of
Shares and class of Shares as to which  Options  may be granted  hereunder,  the
number and class or classes of Shares covered by each outstanding Option and the
Option Price  thereof  shall be  appropriately  adjusted in the event of a stock
dividend,  stock split,  recapitalization or other change in the number or class
of issued and  outstanding  equity  securities of the Company  resulting  from a

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subdivision or consolidation of the Common Stock and/or,  if appropriate,  other
outstanding equity securities or a recapitalization  or other capital adjustment
(not  including  the  issuance  of  Common  Stock  on the  conversion  of  other
securities of the Company which are convertible into Common Stock) affecting the
Common Stock which is effected  without receipt of consideration by the Company.
The Committee shall have authority to determine the adjustments to be made under
this  Section,  and any such  determination  by the  Committee  shall be  final,
binding and conclusive.


     11.  Amendment of the Plan. The Board of Directors of the Company may amend
the  Plan  from  time to  time in such  manner  as it may  deem  advisable.  The
provisions of the Plan relating to (i) which  directors shall be granted Options
pursuant  to  Section 8; (ii) the  amount of Shares  subject to Options  granted
pursuant  to  Section  8;  (iii) the price at which  Shares  subject  to Options
granted pursuant to Section 8 may be purchased; and (iv) the timing of grants of
Options pursuant to Section 8, shall not be amended more than once every six (6)
months,  other  than  to  comport  with  changes  in the  Code  or the  Employee
Retirement  Income  Security Act of 1974,  as amended.  No amendment to the Plan
shall adversely affect any outstanding Option,  however,  without the consent of
the Optionee that holds such Option.


     12. No  Commitment to Retain.  The grant of an Option  pursuant to the Plan
shall not be  construed  to imply or to  constitute  evidence of any  agreement,
express or implied,  on the part of the Company or any  Affiliate  to retain the
Optionee  as a member  of the  Company's  Board  of  Directors  or in any  other
capacity.


     13.  Withholding of Taxes.  Whenever the Company proposes or is required to
deliver or transfer  Shares in  connection  with the exercise of an Option,  the
Company  shall have the right to (a) require the recipient to remit or otherwise
make available to the Company an amount sufficient to satisfy any federal, state
and/or local  withholding tax requirements  prior to the delivery or transfer of
any  certificate  or  certificates  for such Shares or (b) take  whatever  other
action  it  deems  necessary  to  protect  its  interests  with  respect  to tax
liabilities. The Company's obligation to make any delivery or transfer of Shares
shall  be   conditioned  on  the   Optionee's   compliance,   to  the  Company's
satisfaction, with any withholding requirement.


     14.  Interpretation.  The Plan is intended to enable transactions under the
Plan with respect to directors and officers (within the meaning of Section 16(a)
under the Securities Exchange Act of 1934, as amended) to satisfy the conditions
of Rule 16b-3;  to the extent that any provision of the Plan, or any  provisions
of any Option  granted  pursuant to the Plan,  would cause a conflict  with such
conditions or would cause the  administration of the Plan as provided in Section
3 to fail to satisfy the  conditions  of Rule  16b-3,  such  provision  shall be
deemed null and void to the extent permitted by applicable law.