EXHIBIT 4.2

                      NOTE AND WARRANT AMENDMENT AGREEMENT


      This Note and Warrant Amendment  Agreement (this  "AGREEMENT") is made and
entered into as of January 12, 2004,  by and among  Workstream  Inc., a Canadian
corporation (the "COMPANY"),  Crestview Capital Fund, L.P.  ("Fund"),  Crestview
Capital Fund II, L.P.  ("FUND II") and Crestview  Capital  Offshore  Fund,  Inc.
("OFFSHORE").

                                    RECITALS:

      WHEREAS,  on May 14, 2002, the Company sold to Fund,  Fund II and Offshore
8% Senior  Subordinated  Convertible  Notes dated May 14, 2002 in the  principal
amounts of Eight Hundred Sixty Thousand Dollars ($860,000),  Five Hundred Twenty
Thousand Dollars ($520,000) and Twenty Thousand Dollars ($20,000), respectively,
(hereinafter  referred  to as the  "FUND  NOTE,"  the  "FUND  II  NOTE"  and the
"OFFSHORE NOTE," respectively, and collectively, as the "CONVERTIBLE NOTES");

      WHEREAS, in connection with the sale of the Convertible Notes, the Company
issued to each of Fund,  Fund II and  Offshore  Common Stock  Purchase  Warrants
dated May 14, 2002 (hereinafter  referred to as the "FUND WARRANT," the "FUND II
WARRANT" and the "OFFSHORE  WARRANT,"  respectively,  and  collectively,  as the
"WARRANTS"); and

      WHEREAS,  the parties hereto desire to amend (a) the Convertible  Notes to
provide for the automatic  conversion of the outstanding  amounts owed under the
Convertible Notes into shares of the Company's Common Stock (the "COMMON STOCK")
at a  conversion  price of $1.50 per share and (b) the  Warrants  to adjust  the
exercise price to $2.00 per share of Common Stock.

      NOW,  THEREFORE,  in  consideration  of the foregoing  premises and of the
mutual  agreements  and  covenants  set forth  herein,  and for  other  good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:

      1.  Amendments to Convertible  Notes.  Each of the  Convertible  Notes are
hereby amended as follows:

            (a) New Section 2.4. A new section is hereby added as follows to the
Convertible Notes:

                  "2.4. Automatic Conversion.

                        (a)  Notwithstanding  anything  contained  herein to the
contrary,  on January 12, 2004 (the  "AUTOMATIC  CONVERSION  DATE"),  the entire
outstanding  principal of and accrued  interest on this Note as of the Automatic
Conversion Date shall automatically convert,  without any action by or on behalf
of the  Company  or the  Holder,  into that  number  of  shares of Common  Stock
determined by dividing the entire outstanding  principal of and accrued interest
on this Note as of the Automatic  Conversion  Date by $1.50 (the "NEW CONVERSION


<PAGE>

PRICE").  No fractional  shares of Common Stock shall be issued upon conversion.
In lieu of any  fractional  shares of Common  Stock to which  the  Holder  would
otherwise be entitled,  Company  shall pay the Holder cash in an amount equal to
such fraction multiplied by the New Conversion Price.

                        (b) Promptly  following the Automatic  Conversion  Date,
the Holder shall surrender this Note to the Company for  cancellation.  Promptly
following delivery of this Note from the Holder to the Company for cancellation,
the Company shall deliver or cause to be delivered to Holder,  in Holder's name,
certificates  representing the number of fully paid and non-assessable shares of
Common  Stock into which this Note has been  converted  in  accordance  with the
provisions of Section 2.4(a).  Subject to the foregoing  provisions hereof, such
conversion shall be deemed to have occurred on the Automatic  Conversion Date so
that Holder shall be treated for all purposes as having become the record holder
of such shares of Common Stock at such time.

                        (c) On the Automatic Conversion Date, this Note shall be
deemed  paid in full and,  except as set forth in Section  2.4(b),  the  Company
shall have no further obligations hereunder.

                        (d) The shares of Common Stock issuable upon  conversion
of this Note may not be offered,  sold or otherwise  transferred unless (i) they
first shall have been registered  under the Act and applicable  state securities
laws or (ii) the  Company  shall  have been  furnished  with an opinion of legal
counsel (in form,  substance and scope reasonably  acceptable to the Company) to
the  effect  that  such  sale  or  transfer  is  exempt  from  the  registration
requirements  of the Act. Each  certificate  for shares of Common Stock issuable
upon  conversion of this Note that have not been so registered and that have not
been sold  pursuant  to an  exemption  that  permits  removal of the  applicable
legend, shall bear a legend substantially in the following form, as appropriate:

      THE  SECURITIES  REPRESENTED  HEREBY  HAVE NOT BEEN  REGISTERED  UNDER THE
      SECURITIES ACT OF 1933 (THE "ACT"). THE SECURITIES  REPRESENTED HEREBY MAY
      NOT BE OFFERED,  SOLD OR OTHERWISE  TRANSFERRED UNLESS THEY ARE REGISTERED
      UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS,  SALES
      AND  TRANSFERS  ARE  MADE  PURSUANT  TO AN  AVAILABLE  EXEMPTION  FROM THE
      REGISTRATION REQUIREMENTS OF THOSE LAWS."

      2.  Amendments  to Warrants.  Each of the  Warrants are hereby  amended as
follows:

            (a) Purchase Price. The words "$3.70 per Warrant Share" contained in
the first  paragraph of the Warrants shall be replaced with the words "$2.00 per
Warrant Share".

            (b) Deleted Sections. Each of Sections 6(c)(i), 6(c)(ii),  6(c)(iv),
6(d),  6(e),  6(f) and 6(h) of the Warrants is hereby  amended by deleting  such
Section in its entirety and replacing it with "[Intentionally Omitted]."

      3. Acknowledgements.



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<PAGE>

            (a) Each of the Company and Fund acknowledges and agrees that (i) as
of the date hereof, the entire outstanding principal amount and accrued interest
owed by the  Company  to Fund  under  the  Fund  Note is One  Hundred  Sixty-One
Thousand  Two  Hundred  Fifty  Dollars  ($161,250),  (ii)  as a  result  of  the
amendments  herein to the Fund Note,  the Company  will issue One Hundred  Seven
Thousand  Five  Hundred  (107,500)  shares  of  Common  Stock  on the  Automatic
Conversion  Date to Fund in  satisfaction  of the Fund  Note and (iii) as of the
date  hereof,  the  aggregate  number of shares of Common  Stock  issuable  upon
exercise of the Fund Warrant is One Hundred  Ninety-One  Thousand  Seven Hundred
Sixty-Seven (191,767) at an exercise price of $2.00 per share.

            (b) Each of the Company and Fund II acknowledges and agrees that (i)
as of the date  hereof,  the entire  outstanding  principal  amount and  accrued
interest  owed by the Company to Fund II under the Fund II Note is  Ninety-Seven
Thousand  Five Hundred  Dollars  ($97,500),  (ii) as a result of the  amendments
herein to the Fund II Note, the Company will issue Sixty-Five  Thousand (65,000)
shares  of  Common  Stock  on  the  Automatic  Conversion  Date  to  Fund  II in
satisfaction of the Fund II Note and (iii) as of the date hereof,  the aggregate
number of shares of Common Stock  issuable  upon exercise of the Fund II Warrant
is One Hundred Fifteen Thousand Nine Hundred Fifty-Two  (115,952) at an exercise
price of $2.00 per share.

            (c) Each of the Company and  Offshore  acknowledges  and agrees that
(i) as of the date hereof, the entire  outstanding  principal amount and accrued
interest  owed by the  Company  to  Offshore  under the  Offshore  Note is Three
Thousand  Seven  Hundred  Fifty  Dollars  ($3,750),  (ii)  as a  result  of  the
amendments herein to the Offshore Note, the Company will issue Two Thousand Five
Hundred  (2,500)  shares of Common  Stock on the  Automatic  Conversion  Date to
Offshore in  satisfaction  of the Offshore Note and (iii) as of the date hereof,
the  aggregate  number of shares of Common Stock  issuable  upon exercise of the
Offshore  Warrant is Four  Thousand  Four Hundred  Sixty  (4,460) at an exercise
price of $2.00 per share.

            (d) Each of Fund,  Fund II and  Offshore  authorizes  the Company to
execute or cause the execution of one or more termination statements terminating
and removing any liens, security interests or other encumbrances that Fund, Fund
II,  Offshore or their agent may have on the assets of the Company or any of its
subsidiaries. Each of Fund, Fund II and Offshore covenants and agrees to execute
or cause the  execution of any and all  documents  necessary  to  terminate  and
remove any liens,  security  interests or other encumbrances that Fund, Fund II,
Offshore  or their  agent may have on the  assets of the  Company  or any of its
subsidiaries.

      4.  Representations  and  Warranties.  Each party  hereby  represents  and
warrants to the other parties hereto as follows:

            (a) Such party has not assigned,  transferred,  conveyed, pledged or
encumbered  any of its rights or delegated any of its  obligations  under any of
the Convertible Notes or Warrants to any person or entity.

            (b) The  execution,  delivery and  performance of this Agreement has
been duly  authorized by all  requisite  action and will not violate or conflict
with its  charter  or other  governing  documents  or with any  statute,  order,
governmental rule or regulation,  or agreement,  instrument or other document by
which it or its properties are bound.



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<PAGE>

            (c)  This  Agreement   constitutes  the  legal,  valid  and  binding
obligation of such party,  enforceable against such party in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance or other similar
laws or equitable  principles  affecting generally the enforcement of creditors'
rights.

      5.  Confirmation  of Convertible  Notes and Warrants.  Except as expressly
amended by this Agreement, each Convertible Note and each Warrant shall continue
in full  force  and  effect  in  accordance  with the  provisions  thereof.  All
references in the Convertible Notes to this Agreement or words of similar import
shall  refer  to the  Convertible  Notes  as  amended  by  this  Agreement.  All
references  in the Warrants to this  Agreement or words of similar  import shall
refer to the Warrants as amended by this Agreement.

      6. Governing Law. This Agreement shall be governed by the internal laws of
the State of New York, without regard to conflicts of law principles.

      7.  Severability.  In case any  provision  of this  Agreement is held by a
court of competent  jurisdiction to be invalid or unenforceable,  such provision
shall be adjusted rather than voided, if possible,  so that it is enforceable to
the  maximum  extent  possible,  and  the  validity  and  enforceability  of the
remaining  provisions  of this  Agreement  will  not in any way be  affected  or
impaired thereby.

      8.   Counterparts.   This  Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed)  with the same force and effect as if such  facsimile  signature  page
were an original thereof.

      9.  Amendments;  Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument  signed, in the case of an amendment,  by
all of the parties hereto or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought.  No waiver of any default with respect
to any provision,  condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any subsequent  default or a
waiver of any other provision,  condition or requirement  hereof,  nor shall any
delay or omission of either party to exercise any right  hereunder in any manner
impair the exercise of any such right.

      10.  Headings.  The  headings  herein  are for  convenience  only,  do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof.

      11. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their  successors and permitted  assigns.  Any
attempted assignment of this Agreement in violation of the terms of this Section
shall be void without legal effect.  None of the parties  hereto may assign this
Agreement  or any rights or  obligations  hereunder  without  the prior  written
consent of the other parties hereto.



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<PAGE>

      IN WITNESS  WHEREOF and intending to be legally bound hereby,  the parties
hereto have  executed this Note and Warrant  Amendment  Agreement as of the date
first written above.

                               WORKSTREAM INC.




                               By: /s/ Michael Mullarkey
                                  --------------------------------
                                  Name:  Michael Mullarkey
                                  Title: Chief Executive Officer


                               CRESTVIEW CAPITAL FUND, L.P.




                               By: /s/Robert Hoyt
                                  --------------------------------
                                  Name:  Robert Hoyt
                                  Title: Managing Director

                               CRESTVIEW CAPITAL FUND II, L.P.




                               By: /s/ Robert Hoyt
                                  --------------------------------
                                  Name:  Robert Hoyt
                                  Title: Managing Director

                               CRESTVIEW CAPITAL OFFSHORE FUND, INC.




                               By: /s/ Robert Hoyt
                                  --------------------------------
                                  Name:  Robert Hoyt
                                  Title: Managing Director




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