Judge Barry Ostrager said in his order Friday that Xerox's existing joint venture with would have made it hard but not impossible to pursue another deal that would have required a buyer to provide a cash payment to investors.
The activists, Darwin Deason and Carl Icahn, confirmed that the agreement had expired, blamed Xerox for letting it dissolve, and said they would continue to fight the company.
The turn of events elicited an angry response from Icahn and Deason in what they called an open letter to Xerox shareholders.
In the absence of such stipulations, the agreement expired May 3, it said.
Deason and Icahn also said that by failing to take action, the board of directors was "once again intentionally violating their fiduciary duties to Xerox shareholders by pursuing their own brazen self-interest".
The proposed merger with Fuji was already blocked, at least temporarily, by a judge after Deason filed a lawsuit, and it's not clear yet whether that deal will go forward.
"We believe Friday's decision and this agreement mark a watershed moment for corporate governance generally and for Xerox specifically", Icahn said in a statement.
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After the transaction's completion, Fujifilm would have held 50.1 percent of Fuji Xerox - compared with 49.9 percent for current Xerox shareholders, who were to receive a special cash dividend of $2.5 billion.
Xerox and Fujifilm agreed in late January to a $6.1bn deal that would merge the U.S. printer and copier maker into Fuji Xerox, an existing joint venture between Xerox and Fujifilm.
Visentin had previously been hired by Icahn to assist him in fighting Xerox.
The lapsing of the agreement raises the question of whether a potential merger of Xerox and Fujifilm Holdings will proceed. The two investors, who together hold around 15% of Xerox stock, accused the company's board of overseeing "the systematic destruction of Xerox".
"The Xerox Board and management team remain focused on driving continued improvement in financial and operational performance, and will consider all options to create value for the company and its shareholders", according to the statement.
In addition, the court's preliminary ruling that Fuji may have aided and abetted the Xerox directors' breach is notable and may be challenged by Fuji on appeal.
A NY judge last week temporarily halted the takeover plan, after Deason filed a suit to stop the pact and terminate existing joint venture agreements between the companies. The settlement did not resolve the activists' claims against Fujifilm, which the shareholders have criticized for aiding previous Xerox management.