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                                                                   EXHIBIT 10.31

                            BAKER HUGHES INCORPORATED
                       NONQUALIFIED STOCK OPTION AGREEMENT

Grantee                                                           Shares Granted

Pursuant to action taken by the Compensation Committee of the Board of Directors
of Baker Hughes Incorporated, a Delaware corporation (the "Company"), for the
purposes of administration of the Baker Hughes Incorporated Long Term Incentive
Plan, as amended (the "Plan"), the above-named Grantee is hereby granted a
nonqualified stock option to purchase the above number of shares of the
Company's $1 par value per share common stock at the exercise price of $22.857
for each share subject to this option, payable at the time of exercise. Subject
to the terms of the Plan and this Stock Option Agreement regarding exercise,
this option will vest and become exercisable with respect to increments of
thirty-three and one-third percent (33-1/3%) of the shares subject to this
option on the 26th day of January in each of the years 2001, 2002 and 2003,
provided the Grantee remains employed by the Company or its subsidiaries. This
option may not be exercised after January 26, 2010.

The following provisions will apply in the event of Grantee's termination of
employment:

         1. If Grantee's employment is terminated for any reason (other than as
covered by the following paragraphs, or by the Company without Cause or by the
Grantee for Good Reason within two years following a Change of Control), this
option will wholly and completely terminate on the date of termination of
employment, to the extent it is not then exercisable; however, to the extent the
option is exercisable, Grantee shall have three months from the date of
termination of employement to exercise the option (but in no event later than
January 26, 2010).

         2. If Grantee's employment is terminated for Cause, including but not
limited to fraud, theft, embezzlement committed against the Company or any of
its affiliated companies or customer of the Company, or for conflict of
interest, unethical conduct, dishonesty affecting the assets, properties or
business of the Company or any of its affiliated companies, willful misconduct,
or continued material dereliction of duties, if such termination of employment
occurs prior to a Change of Control or after the second anniversary of a Change
of Control, this option will wholly and completely terminate on the date of
termination of employment, or if such termination occurs within two years
following a Change of Control, this option will wholly and completely terminate
on the date thirty days following such termination of employment (but in no
event later than January 26, 2010).

         3. In the event of the retirement (such that the Grantee's age plus
years of service with the Company equals or exceeds 65) or disability of the
Grantee, all granted but unvested options shall immediately vest upon the
Grantee's retirement or disability. The Grantee shall have three years from the
date of termination of employment due to retirement or disability to exercise
this option (but in no event later than January 26, 2010).

         4. Upon the death of the Grantee in active service, all granted but
unvested options shall immediately vest upon the Grantee's death and otherwise
shall be exercisable for a period of one year following Grantee's death (but in
no event later than January 26, 2010).

         5. Upon the termination of employment of the Grantee by the Company
without Cause or by the Grantee for Good Reason within two years following a
Change of Control, the Grantee shall have two years from the date of termination
of employment to exercise this option (but in no event later than January 26,
2010).

In the event that the Company is party to a transaction which is otherwise
intended to qualify for "pooling of interests" accounting treatment (i) the
provisions of this option shall to the extent practicable, be interpreted so as
to permit such accounting treatment, and (ii) to the extent that application of
clause (i) of this sentence does not preserve the availability of such
accounting treatment, then, to the extent that any of the provisions of this
option

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disqualifies the transaction as a "pooling" transaction, the Board of Directors
of the Company may amend any provisions of this option and/or declare this
option null and void if and to the extent necessary (including declaring such
provision or provisions to be null and void as of the date hereof) so that such
transaction may be accounted for as a "pooling of interests."

Notwithstanding any other provision of this Nonqualified Stock Option Agreement,
if Grantee engages in a "Prohibited Activity," as described below, while
employed by the Company or any of its affiliates or within two years after
Grantee's employment termination date, then Grantee's right to exercise any
portion of this option, to the extent still outstanding at that time, shall
immediately thereupon wholly and completely terminate. If an allegation of a
Prohibited Activity by Grantee is made to the Compensation Committee of the
Board of Directors of the Company (the "Committee"), the Committee, in its
discretion, may suspend the exercisability of this option for up to two months
to permit the investigation of such allegation, however, if it is determined
that no Prohibited Activity was engaged in by Grantee, the period of
exercisability of this option will be increased by the amount of time of such
suspension, however, in no event will this option be exercisable more than ten
(10) years from the date of grant. A "Prohibited Activity" shall be deemed to
have occurred, as determined by the Committee in its sole and absolute
discretion, if Grantee:

         (i) divulges any non-public, confidential or proprietary information of
         the Company or its past, present or future affiliates (collectively,
         the "Baker Hughes Group"), but excluding information that (a) becomes
         generally available to the public other than as a result of Grantee's
         public use, disclosure, or fault, or (b) becomes available to Grantee
         on a non-confidential basis after Grantee's employment termination date
         from a source other than a member of the Baker Hughes Group prior to
         the public use or disclosure by Grantee, provided that such source is
         not bound by a confidentiality agreement or otherwise prohibited from
         transmitting the information by a contractual, legal or fiduciary
         obligation; or

         (ii) directly or indirectly, consults or becomes affiliated with,
         conducts, participates or engages in, or becomes employed by, any
         business that is competitive with the business of any member of the
         Baker Hughes Group, wherever from time to time conducted throughout the
         world, including situations where Grantee solicits or participates in
         or assists in any way in the solicitation or recruitment, directly or
         indirectly, of any employees of any member of the Baker Hughes Group.

Cashless exercise, in accordance with the terms of the Plan, shall be available
to Grantee for the shares subject to this option.

To the extent the exercise of this option results in taxable income to Grantee,
the Company is authorized to withhold from any remuneration payable to Grantee
any tax required to be withheld by reason of such taxable income.

This option is granted under and is subject to all of the provisions of the
Plan. Capitalized terms which are not defined herein shall have the meaning
ascribed to such terms in the Plan. This option is not transferable by the
Grantee otherwise than by will or by the laws of descent and distribution, and
is exercisable during the Grantee's lifetime only by the Grantee.

     Date of Grant:  January 26, 2000

                                             BAKER HUGHES INCORPORATED

                                             -----------------------------------
                                             G. S. FINLEY
                                             SENIOR VICE PRESIDENT<PAGE>   1
                                                                    EXHIBIT 10.9

                           AMENDMENT TO LOAN AGREEMENT

        THIS AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made and entered
into as of December 31, 1999 by and among NATIONAL-OILWELL, L.P., a Delaware
limited partnership, NATIONAL-OILWELL CANADA LTD., a British Columbia company,
and DRECO ENERGY SERVICES LTD., an Alberta corporation (collectively herein
called the "Borrowers"); each of the Lenders which is or may from time to time
become a party to the Loan Agreement (as defined below) (individually, a
"Lender" and, collectively, the "Lenders"), THE CHASE MANHATTAN BANK OF CANADA,
as "Canadian Agent" ("Canadian Agent"), CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION (previously known as Texas Commerce Bank National Association), as
"U.S. Agent" ("U.S. Agent"), WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION, as
U.S. Co-Agent, THE BANK OF NOVA SCOTIA, as Canadian Co-Agent, and
NATIONAL-OILWELL, INC., a Delaware corporation (the "Parent").

                                    RECITALS

        A. The Borrowers, the Lenders, the Canadian Agent and the U.S. Agent
executed and delivered that certain Loan Agreement dated as of September 25,
1997, as amended by instruments dated as of June 1, 1998, June 24, 1998, August
26, 1998, April 1, 1999 and December 20, 1999. Said Loan Agreement, as amended,
supplemented and restated, is herein called the "Loan Agreement". Any
capitalized term used in this Amendment and not otherwise defined shall have the
meaning ascribed to it in the Loan Agreement.

        B. The Borrowers, the Lenders, the Canadian Agent and the U.S. Agent
desire to amend the Loan Agreement in certain respects.

        NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and warranties herein set forth, and further good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrowers, the Lenders, the Canadian Agent and the U.S. Agent
do hereby agree as follows:

        SECTION 1. Amendment to Loan Agreement. Section 7.3(c) of the Loan
Agreement is hereby amended to read in its entirety as follows:

               (c) Interest Coverage Ratio - an Interest Coverage Ratio of not
        less than (i) for the fiscal quarter ending on December 31, 1999 through
        the fiscal quarter ending on June 30, 2000, 2.00 to 1.00, (ii) for the
        fiscal quarter ending on September 30, 2000, 2.50 to 1.00 and (iii) 3.00
        to 1.00 at all times thereafter.

        SECTION 2. Ratification. Except as expressly amended by this Amendment,
the Loan Agreement and the other Loan Documents shall remain in full force and
effect. Except as expressly provided in this Amendment, (a) none of the rights,
title and interests existing and to exist under the Loan Documents are hereby
released, diminished or impaired, and (b) Parent and the Borrowers hereby
reaffirm all covenants, representations and warranties in the Loan Documents.

        SECTION 3. Expenses. Parent shall pay to the Canadian Agent and the U.S.
Agent all reasonable fees and expenses of their respective legal counsel
(pursuant to Section 11.3 of the Loan Agreement) incurred in connection with the
execution of this Amendment.

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        SECTION 4. Certifications. Each of Parent and the Borrowers hereby
certifies that (a) no material adverse change in its assets, liabilities,
financial condition, business or affairs has occurred and (b) no Default or
Event of Default has occurred and is continuing or will occur as a result of
this Amendment.

        SECTION 5. Miscellaneous. This Amendment (a) shall be binding upon and
inure to the benefit of Parent, the Borrowers, the Lenders, the Canadian Agent
and the U.S. Agent and their respective successors, assigns, receivers and
trustees; (b) may be modified or amended only by a writing signed by the
required parties; (c) shall be governed by and construed in accordance with the
laws of the State of Texas and the United States of America; (d) may be executed
in several counterparts by the parties hereto on separate counterparts, and each
counterpart, when so executed and delivered, shall constitute an original
agreement, and all such separate counterparts shall constitute but one and the
same agreement and (e) together with the other Loan Documents, embodies the
entire agreement and understanding between the parties with respect to the
subject matter hereof and supersedes all prior agreements, consents and
understandings relating to such subject matter. The headings herein shall be
accorded no significance in interpreting this Amendment.

             NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SECTION 26.02

        THE LOAN AGREEMENT, AS AMENDED BY THIS AMENDMENT, AND ALL OTHER LOAN
DOCUMENTS EXECUTED BY ANY OF THE PARTIES PRIOR HERETO OR SUBSTANTIALLY
CONCURRENTLY HEREWITH CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

        IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have caused
this Amendment to be signed by their respective duly authorized officers,
effective as of the date first above written.

                                NATIONAL-OILWELL, L.P.,
                                a Delaware limited partnership, as U.S. Borrower

                                By:  Its Sole General Partner, NOW Oilfield
                                     Services, Inc., a Delaware corporation

                                     By:           /s/ Daniel L. Molinaro
                                        ----------------------------------------
                                     Name:         Daniel L. Molinaro
                                          --------------------------------------
                                     Title:        Treasurer
                                           -------------------------------------

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                                NATIONAL-OILWELL CANADA LTD.,
                                a British Columbia company,
                                as Canadian Borrower

                                By:                /s/ Daniel L. Molinaro
                                   ---------------------------------------------
                                Name:              Daniel L. Molinaro
                                     -------------------------------------------
                                Title:             Treasurer
                                      ------------------------------------------

                                DRECO ENERGY SERVICES LTD.,
                                an Alberta corporation, as Canadian Borrower

                                By:                /s/ Daniel L. Molinaro
                                   ---------------------------------------------
                                Name:              Daniel L. Molinaro
                                     -------------------------------------------
                                Title:             Treasurer
                                      ------------------------------------------

                                NATIONAL-OILWELL, INC.,
                                a Delaware corporation, as Parent

                                By:                /s/ Daniel L. Molinaro
                                   ---------------------------------------------
                                Name:              Daniel L. Molinaro
                                     -------------------------------------------
                                Title:             Treasurer
                                      ------------------------------------------

                                CHASE BANK OF TEXAS, NATIONAL
                                ASSOCIATION, as U.S. Agent and as a U.S. Lender

                                By:                /s/ Mona M. Foch
                                   ---------------------------------------------
                                Name:              Mona M. Foch
                                     -------------------------------------------
                                Title:             Managing Director
                                      ------------------------------------------

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                                THE CHASE MANHATTAN BANK OF CANADA,
                                as Canadian Agent and as a Canadian Lender

                                By:                /s/ Christine Chan
                                   ---------------------------------------------
                                Name:              Christine Chan
                                     -------------------------------------------
                                Title:             Vice President
                                      ------------------------------------------

                                WELLS FARGO BANK (TEXAS), NATIONAL
                                ASSOCIATION, as U.S. Co-Agent and as a U.S.
                                Lender

                                By:                /s/ Frank W. Schageman
                                   ---------------------------------------------
                                Name:              Frank W. Schageman
                                     -------------------------------------------
                                Title:             Vice President
                                      ------------------------------------------

                                THE BANK OF NOVA SCOTIA,
                                as Canadian Co-Agent and as a
                                Canadian Lender

                                By:                /s/ J. Doug Foster
                                   ---------------------------------------------
                                Name:              J. Doug Foster
                                     -------------------------------------------
                                Title:             Director
                                      ------------------------------------------

                                THE BANK OF NOVA SCOTIA,
                                as a U.S. Lender

                                By:               /s/ F.C.H. Ashby
                                   ---------------------------------------------
                                Name:             F.C.H. Ashby
                                     -------------------------------------------
                                Title:            Senior Manager Loan Operations
                                      ------------------------------------------

                                THE BANK OF NEW YORK

                                 By:                /s/ Peter W. Keller
                                   ---------------------------------------------
                                 Name:              Peter W. Keller
                                     -------------------------------------------
                                 Title:             Vice President
                                      ------------------------------------------
                                 BANK ONE LOUISIANA, N.A.
<PAGE>   5

                                 By:                /s/ J. Charles Freel, Jr.
                                    --------------------------------------------
                                 Name:              J. Charles Freel, Jr.
                                      ------------------------------------------
                                 Title:             First Vice President
                                       -----------------------------------------

                                 SOUTHWEST BANK OF TEXAS

                                 By:                /s/ Randall L. Walker
                                    --------------------------------------------
                                 Name:              Randall L. Walker
                                      ------------------------------------------
                                 Title:             Senior Vice President
                                       -----------------------------------------

                                 FIRST UNION NATIONAL BANK

                                 By:                /s/ Robert R. Wetteroff
                                    --------------------------------------------
                                 Name:              Robert R. Wetteroff
                                      ------------------------------------------
                                 Title:             Senior Vice President
                                       -----------------------------------------

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