<PAGE>   1
                                                                   EXHIBIT 10.37



                              TRITEAL CORPORATION
                        INCENTIVE STOCK OPTION AGREEMENT
                                 (FACING PAGE)

     FOR GOOD AND VALUABLE CONSIDERATION, TriTeal Corporation, a Delaware
corporation (the "Company"), hereby irrevocably grants to the Employee named
below an incentive stock option (the "Option") to purchase any part or all of
the specified number of shares of its Common Stock upon the terms and subject
to the conditions set forth in this Agreement, at the specified purchase price
per share without commission or other charge.  The Option is granted pursuant
to the TriTeal Corporation 1995 Stock Option Plan (the "Plan") and the Terms
and Conditions Relating to Incentive Stock Option (the "Terms and Conditions")
attached hereto.  The terms of the Plan and the Terms and Conditions are hereby
incorporated herein by reference and made a part of this Option Agreement.


<TABLE>
<CAPTION>
Name of Employee:                                                   David Y. Chen
<S>                                                                 <C>

Social Security Number:
                                                                    --------------

Number of Shares covered by
Option (the "Option Shares"):                                       29,263

Purchase Price Per Option Share:                                    $10.25

Minimum Number of Option Shares Per
Partial Exercise (unless Optionee exercises
all of the Option then exercisable):
                                                                    --------------
</TABLE>

The Option shall become exercisable as follows:

     8,071 of the total number of shares granted hereunder shall vest on July
     22, 1998, and thereafter 337 of the remaining number of shares shall vest
     on the 22nd of each month for the remainder of calendar year 1998; 813 of
     the remaining shares shall vest on the 22nd of each month during calendar
     year 1999; and 1,393 of the remaining shares shall vest on the 22nd of
     each month during calendar year 2,000, such that the Option shall be 100%
     vested on July 22, 2000.  Notwithstanding the foregoing, in the event that
     (1) the employment of the Optionee is, prior to July 22, 1998, terminated
     by the Company other than for Cause (as that term is defined in the Terms
     and Conditions), or (2) the Optionee terminates his employment with the
     Company prior to July 22, 1998 for Good Reason (as that term is defined in
     the Terms and Conditions), then 8,071 of the total number of shares
     granted hereunder shall be 100% vested immediately following such event.
     Once subject to purchase, the Option Shares shall remain subject to
     purchase until July 21, 2007 (the "Expiration Date") unless the Option is
     earlier terminated in accordance with the Plan and the Terms and
     Conditions.


Date of this Option Agreement:  July 22, 1997

TRITEAL CORPORATION                              ______________________________
                                                 Optionee's Signature



By:____________________________                  Residence Address:
Name:_______________________                     ______________________________
Title:______________________                     ______________________________






<PAGE>   2
                        TERMS AND CONDITIONS RELATING TO
                             INCENTIVE STOCK OPTION
                            GRANTED TO DAVID Y. CHEN



              UNDER THE TRITEAL CORPORATION 1995 STOCK OPTION PLAN

                                 July 22, 1997

         The following Terms and Conditions Relating to Incentive Stock Option
(the "Terms and Conditions") apply to the Incentive Stock Option granted as of
the date hereof to David Y. Chen under the TriTeal Corporation 1995 Stock
Option Plan (the "Plan"), the applicable terms of which are hereby incorporated
by reference and made a part of these Terms and Conditions.  In turn, these
Terms and Conditions are incorporated by reference into the Option.  Whenever
capitalized terms are used in these Terms and Conditions, they shall have the
meaning specified (i) in the Plan, (ii) in the TriTeal Corporation Incentive
Stock Option Agreement Facing Page (the "Facing Page") into which these Terms
and Conditions are incorporated by reference, or (iii) below, unless the
context clearly indicates to the contrary.  As used herein and in the Plan, the
"Option Agreement" shall mean the Incentive Stock Option Agreement Facing Page
and these Terms and Conditions as incorporated therein.  The masculine pronoun
shall include the feminine and neuter, and the singular and plural, where the
context so indicates.

         1.      TERM OF OPTION.  Subject to the maximum time limitations in
Section 6(a) of the Plan, the term of the Option shall be the period commencing
on the date of the Option Agreement and ending on the Expiration Date (as
defined in the Facing Page), unless terminated earlier as provided herein or in
the Plan; provided, however, if the Optionee owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company (or any
of its Affiliates), the Option shall expire not later than five (5) years after
the date of the Option Agreement.

         2.      EXERCISE PRICE.  The exercise price of the Option granted
hereby shall not be less than one hundred percent (100%) of the Fair Market
Value of the Option Shares subject to the Option on the date the Option is
granted.

         3.      EXERCISE OF OPTION.

                 (a)      The Facing Page shall set forth the rate at which the
Option Shares shall become subject to purchase by Optionee.

                 (b)      "Cause," as that term is used in the Facing Page,
shall mean misconduct, including:  (i) conviction of any felony or any crime
involving moral turpitude or dishonesty; (ii) participation in a fraud or act
of dishonesty against the Company; (iii) willful breach of the Company's
policies; (iv) intentional damage to the Company's property; (v) material
breach of Optionee's employment agreement or Optionee's Proprietary Information
and Inventions Agreement; or (vi) conduct by Optionee which in the good faith
and reasonable determination of the Board demonstrates unacceptable job
performance or gross unfitness to serve.  Physical or mental disability shall
not constitute Cause.  "Good Reason," as that term is used in the Facing Page,
shall mean (i) substantial reduction of Optionee's rate of compensation in
effect on the date hereof (except to the extent that substantially all other
officers of the Company are similarly





                                       1.
<PAGE>   3

affected); (ii) failure to provide a package of welfare benefit plans which,
taken as a whole, provide substantially similar benefits to those in which the
Optionee is entitled to participate as of the date hereof (except that employee
contributions may be raised to the extent of any cost increases imposed by
third parties) or any action by the Company which would adversely affect
Optionee's participation or substantially reduce Optionee's benefits under any
of such plans (except to the extent that substantially all other officers of
the Company are similarly affected); (iii) change in Optionee's employment
responsibilities, authority, title or office resulting in diminution of
position, excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith which is remedied by the Company promptly after
notice thereof is given by Optionee; or (iv) requirement that Optionee relocate
his current residence, unless Optionee accepts the request of the Company to
make such relocation.

                 (c)      Optionee shall exercise the Option to the extent
exercisable, in whole or in part, by sending written notice to the Company in
the form attached hereto as Exhibit A of his intention to purchase Option
Shares hereunder.  Except as otherwise provided in the Plan, Optionee shall not
exercise the Option at any one time with respect to less than the minimum
number of Option Shares as is set forth on the Facing Page.

                 (d)      Payment of the exercise price per share is due in
full upon exercise of all or any part of each installment which has accrued to
the Optionee.  The Optionee may elect, to the extent permitted by applicable
statutes and regulations, to make payment of the exercise price under one of
the following alternatives:

                          (i)     Payment of the exercise price per Option
Share in cash (including check) at the time of exercise;

                          (ii)    Payment pursuant to a program developed in
compliance with regulations promulgated by the Federal Reserve Board which,
prior to the issuance of the Option Shares, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to a
qualified broker that sufficient Option Shares to pay the aggregate exercise
price be sold immediately and that the exercise price be delivered to the
Company from the sales proceeds; or

                          (iii)   Payment by a combination of the above methods
of payment.

                 (e)      Optionee agrees to complete and execute any
additional documents which the Company reasonably requests that Optionee
complete in order to comply with applicable federal, state and local securities
laws, rules and regulations.

                 (f)      Subject to the Company's compliance with all
applicable laws, rules and regulations relating to the issuance of such Option
Shares and Optionee's compliance with all the terms and conditions of the
Option Agreement, these Terms and Conditions and the Plan, the Company shall
promptly deliver the Option Shares to the Optionee.

                 (g)      Except as otherwise provided herein or in the Plan,
the Option may be exercised during the lifetime of the Optionee only by the
Optionee.

         4.      OPTION NOT TRANSFERABLE.  The Option granted hereunder shall
not be transferable in any manner other than upon the death of Optionee as
provided in the Plan.  More





                                       2.
<PAGE>   4

particularly (but without limiting the foregoing), the Option may not be
assigned, transferred (except as expressly provided herein), pledged or
hypothecated in any way, shall not be assignable by operation of law and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.

         5.      TERMINATION OF OPTION.

                 (a)      To the extent not previously exercised, the Option
shall terminate on the Expiration Date; provided, however, that except as
otherwise provided in this Section 5 the Option may not be exercised more than
thirty (30) days after the termination of Optionee's Continuous Status as an
Employee, Director or Consultant  for any reason (other than upon Optionee's
death or disability).  Within such thirty (30) day period, Optionee may
exercise the Option only to the extent the same was exercisable on the date of
such termination of Optionee's Continuous Status as an Employee, Director or
Consultant, and said right to exercise shall terminate at the end of such
period.

                 (b)      In the event of a termination of Optionee's
Continuous Status as an Employee, Director or Consultant as a result of
Optionee's disability, the Option shall be exercisable for a period of twelve
(12) months from the date of such termination of Optionee's Continuous Status
as an Employee, Director or Consultant, but in no event later than the
Expiration Date and only to the extent that the Option was exercisable on the
date of such termination.

                 (c)      In the event of a termination of Optionee's
Continuous Status as an Employee, Director or Consultant as a result of
Optionee's death, the Option shall be exercisable by the Optionee's estate (or
by the person who acquires the right to exercise the Option by will or by the
laws descent and distribution or by designation pursuant to Section 6(d) of the
Plan) for a period of twelve (12) months from the date of such termination, but
in no event later than the Expiration Date and only to the extent that the
Optionee was entitled to exercise the Option on the date of death.

                 (d)      Notwithstanding anything herein to the contrary, no
portion of any Option which is not exercisable by the Optionee upon a
termination of Optionee's continuous status as an Employee, Director or
Consultant shall thereafter become exercisable, regardless of the reason for
such termination.

         6.      NO RIGHT TO CONTINUED EMPLOYMENT.  The Option does not confer
upon Optionee any right to continue in his or her capacity as an Employee,
Consultant or Director of the Company, nor does it limit in any way the right
of the Company to terminate Optionee's service relationship at any time, with
or without cause.

         7.      NOTICE OF TAX ELECTION.  If Optionee makes any tax election
relating to the treatment of the Option Shares under the Internal Revenue Code
of 1986, as amended, Optionee shall promptly notify the Company of such
election.





                                       3.
<PAGE>   5


         8.      ACKNOWLEDGMENTS OF OPTIONEE.  Optionee acknowledges and
agrees that:

                 (a)      Although the Company has made a good faith attempt to
qualify the Option as an incentive stock option within the meaning of Sections
421, 422 and 424 of the Code, the Company does not warrant that the Option
granted herein constitutes an "incentive stock option" within the meaning of
such sections, or that the transfer of Option Shares will be treated for
federal income tax purposes as specified in Section 421 of the Code.

                 (b)      Optionee shall notify the Company in writing within
fifteen (15) days of each disposition (including a sale, exchange, gift or a
transfer of legal title) of the Option Shares made within three years after the
issuance of such Option Shares.

                 (c)      Optionee understands that if, among other things, he
or she disposes of any Option Shares granted within two years of the granting
of the Option to him or within one year of the issuance of such shares to him,
then such Option Shares will not qualify for the beneficial treatment which
Optionee might otherwise receive under Sections 421 and 422 of the Code.

                 (d)      Optionee and his transferees shall have no rights as
a shareholder with respect to any Option Shares until the date of the issuance
of a stock certificate (or such other means of issuance of the Option Shares as
provided by the Company in accordance with the terms of the Plan) evidencing
such Option Shares.  No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 13 of the Plan.

         9.      WITHHOLDING TAXES.  Whenever Option Shares are to be issued
under the Option Agreement, the Company shall have the right to require
Optionee to remit to the Company an amount sufficient to satisfy federal, state
and local withholding tax requirements prior to issuance and/or delivery of any
certificate or certificates for such Option Shares.

         10.     MISCELLANEOUS.

                 (a)      The Option Agreement shall bind and inure to the
benefit of the parties' heirs, legal representatives, successors and permitted
assigns.

                 (b)      The Option Agreement, the Plan, and these Terms and
Conditions constitute the entire agreement between the parties pertaining to
the subject matter contained herein and they supersede all prior and
contemporaneous agreements, representations and understandings of the parties.
No supplement, modification or amendment of the Option Agreement shall be
binding unless executed in writing by all of the parties.  No waiver of any of
the provisions of the Option Agreement shall be deemed or shall constitute a
waiver of any other provisions, whether or not similar, nor shall any waiver
constitute a continuing waiver.  No waiver shall be binding unless executed in
writing by the party making the waiver.  In the event there exists any conflict
or discrepancy between any of the terms in the Plan and the Option Agreement,
the terms of the Plan shall be controlling.  A copy of the Plan has been
delivered to the Optionee and also may be inspected by Optionee at the
principal office of the Company.





                                       4.
<PAGE>   6

                 (c)      Should any portion of the Plan, the Option Agreement
of these Terms and Conditions be declared invalid and unenforceable, then such
portion shall be deemed to be severable from the Option Agreement and shall not
affect the remainder hereof.

                 (d)      All notices to be sent hereunder shall be delivered
in person or sent by United States Mail, certified and postage prepaid, to
Optionee at the address set forth on the Facing Page of the Option Agreement or
to the Company at its principal place of business, Attention:  Chief Financial
Officer.  Any change in the address to which notices shall be sent under the
Option Agreement to the Optionee shall be made by the Optionee upon ten (10)
days' written notice to the Company.

                 (e)      The prevailing party in any court action brought to
interpret or enforce any provision of the Plan or the Option Agreement shall be
entitled to recover, as an element of the costs of suit, and not as damages, an
award of reasonable attorneys' fees, to be fixed by the court.  Such award may
be made as part of a judgment by default or as part of a judgment after trial
or after appeal.















                                       5.
<PAGE>   7
                                   EXHIBIT A



                  NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION



To:      TriTeal Corporation
         2011 Palomar Airport Road
         Carlsbad, CA  92009-1432



         I, a resident of the State of _________________________, hereby
exercise my incentive stock option granted by TRITEAL CORPORATION, a Delaware
corporation (the "Company"), pursuant to an Incentive Stock Option Agreement
dated _________, 199__, subject to all the terms and provisions thereof and
notify the Company of my desire to purchase _____ shares of Common Stock of the
Company at the exercise price of ____________________________ Dollars
($________) per share pursuant to said option.



         I agree to complete and execute any additional documents which the
Company may request that I complete in order to comply with applicable federal,
state and local securities laws, rules and regulations.



Dated:___________________





                                                      _________________________
_________________________                             [Name]
Social Security or                                    
Taxpayer I.D. Number

                                                      Address:

                                                      _________________________
                                                      _________________________
                                                      _________________________