Toy Maker Ousts Top 2 Executives : Chatsworth: The board of directors of With Design in Mind International is investigating allegations of misconduct.

The two top executives of With Design in Mind International Inc. in Chatsworth, a financially struggling maker of novelty gift items and toys, were ousted last week from the company after being accused of misconduct.

Steve Zuloff, With Design’s chairman and chief executive, and Barry R. Benjamin, the president and chief financial officer, resigned “pending the results of a board investigation into alleged misconduct,” With Design said in a statement.

With Design officials declined to elaborate on the nature or the source of the allegations.

Zuloff, 48, and Benjamin, 54, co-founded With Design in 1986. Zuloff was replaced as chief executive by Sheldon F. Morick, who joined the company in April as executive vice president. Michael S. Manahan, With Design’s vice president of finance since November, was appointed chief financial officer.

Morick said some members of the company’s board of directors were made aware of the allegations a few weeks ago. The board met June 23, and “we asked for their resignations and they acceded to our request.”

Zuloff could not be reached for comment. Benjamin, reached by phone at his residence, declined to comment. Each former executive owns about 11% of With Design’s stock.

At the same board meeting David S. Benjamin, Barry Benjamin’s son, was terminated as With Design’s vice president of sales because of his possible involvement in the alleged misconduct, Morick said.

Greg Lindstrom, an attorney retained by With Design’s board to help in the investigation, said the company has been in contact with the Securities and Exchange Commission regarding the allegations as a matter of standard procedure. He said he knows of no other investigations into the company’s affairs.

The investigation could take as long as a month, Lindstrom said. “We were concerned that the company have immediately identifiable leadership in place” while the investigation continues, he said.

Mark Matheson, senior analyst at the Los Angeles investment firm Crowell, Weedon & Co., said he didn’t know what Zuloff and Benjamin were accused of, but he said, “I was praying for” their resignations because of With Design’s continued losses and declining stock price.

“I just know that things were not being run in the shareholders’ best interest.”

With Design’s stock, which traded above $8 a share one year ago, closed Monday at $1.75 a share.

The company’s products are sold through specialty retailers and catalog companies. Its products include PinPressions, a toy that molds itself to the shape of objects with thousands of tiny pins, a device that simulates liquid pouring from a spout and a gadget that creates a laser light show when hooked to a stereo.

The company also has a license to market a video-based technology called Micro Theatre, which creates three-dimensional images. Micro Theatre is now being used in a video arcade game introduced a year ago by Sega Enterprises of Japan.

Despite its hopes for more widespread uses of Micro Theater, With Design lost $426,915 on sales of $6.8 million in its fiscal year that ended Sept. 30, 1991. It lost an additional $1.5 million on sales of $2.4 million in the three months that ended Dec. 31.

Morick, a former executive at toy makers Mattel Inc. and Revell Inc., said With Design’s losses were due in part to the sluggish economy, which curtailed consumer spending on the types of nonessential products that With Design makes.

But he also blamed the company’s troubles on its bloated overhead. In the last three months, he said, With Design laid off about 20% of its staff and now has about 20 employees.

The company will also benefit, Morick said, from not having to pay salaries to Zuloff and Benjamin. In fiscal 1991, Zuloff received $152,000 in cash compensation. Benjamin received $177,000.

In addition to focusing greater effort on marketing Micro Theatre, Morick said he intends to steer With Design toward toys and gift items that are functional and amusing, such as unusual clocks or lamps.