<PAGE>   1

                                                                   EXHIBIT 10.35

                          SECOND MODIFICATION AGREEMENT

This SECOND MODIFICATION AGREEMENT entered into at Boston, Massachusetts as of
April 26, 2000, between GARDEN BOTANIKA, INC. (hereinafter, the "Borrower"), a
Washington corporation with its principal executive offices at 8624 154th Avenue
NE, Redmond, WA 98052, and a debtor-in-possession in the Proceedings and FLEET
RETAIL FINANCE INC. f/k/a BankBoston Retail Finance Inc., with an address of 40
Broad Street, Boston, MA 02109 (the "Lender").

WHEREAS, Lender established a revolving line of credit (the "Revolving Credit")
pursuant to a Loan and Security Agreement dated as of April 23, 1999 (as amended
and modified from time to time, the "Loan Agreement") for the Borrower under
which the Lender agreed to make advances to, and other financial accommodations
for the benefit of, the Borrower until the Maturity Date subject to the terms
and conditions of the Loan Agreement. All initially capitalized terms shall have
the definitions ascribed to them in the Loan Agreement, unless otherwise defined
herein.

WHEREAS, the Borrower has requested that the Lender establish a $2,000,000
letter of credit facility, permit the Borrower to borrow up to $2,100,000
secured by cash collateral, amend the advance rates under the Borrowing Base,
and waive an Event of Default resulting from a change in control of the
Borrower's management.

WHEREAS, subject to the terms and conditions in this Agreement, the Lender is
willing to modify the terms of the Loan Agreement in order to accommodate the
Borrower's request.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Lender and the Borrower mutually agree as
follows:

      1.    Effective Date: The "Effective Date" of this Agreement shall be the
date upon which the Lender receives each of the following items: (i) this Second
Modification Agreement, duly executed by the Borrower and (ii) an order entered
by the Bankruptcy Court in form and substance acceptable to the Lender in its
discretion, approving this Second Modification Agreement in the Proceedings.

      2.    Amendments. The Loan Agreement is hereby amended as follows:

      (a)   Article I shall be amended by adding the following definitions in
appropriate alphabetical order:

            "Cash Collateral Account": The cash collateral account held by the
            Lender or BankBoston, a trade name of Fleet National Bank to hold
            cash deposited by the Borrower pursuant to the terms of the
            Liquidation Order.

            "Cash Collateral Amount": The value of the cash deposited held in
            the Cash Collateral Account that is subject to the valid, perfected,
            and first-priority security interest of the Lender and the terms of
            the Cash Collateral Account Agreement delivered herewith, subject to
            the terms of the Liquidation Order.

            "Cash Collateral Facility": As defined in Section 2.2 hereof.



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            "Committee Authorized Cash Collateral Loan Amount": The lesser of
            $2,100,000 or the amount authorized to be borrowed under the Cash
            Collateral Facility by the creditors' committee and approved by the
            Bankruptcy Court in the Bankruptcy Case.

            "Issuer": The issuer of any L/C.

            "L/C": Any letter of credit, the issuance of which is procured by
            the Lender for the account of the Borrower and any acceptance made
            on account of such letter of credit.

            "L/C Landing Costs": To the extent not included in the Stated Amount
            of an L/C, customs, duty, freight, and other out of pocket costs and
            expenses which will be expended to "land" the Inventory, the
            purchase of which is supported by such L/C.

            "Liquidation Order": The Order Approving Second Inventory
            Liquidation Agreement et al dated January 28, 2000 entered by the
            Bankruptcy Court in the Bankruptcy Case.

            "Stated Amount": The maximum amount for which an L/C may be
            honored."

      (b)   The definition of "Availability Reserves" in Article I shall be
amended to add, after the end of clause (vi) therein, the following as new
clause (vii): "(vii) L/C Landing Costs."

      (c)   The definition of "Inventory Advance Rate" in Article I shall be
deleted and replaced with the following:

            "Inventory Advance Rate": The following percentage: The lesser of
            (i) Eighty Percent (80%) of the Net Liquidation Value of Acceptable
            Inventory; or (ii) either: (a) from and after September 15 of any
            year to December 15 of such year, Ninety Percent (90%) of the Cost
            of Acceptable Inventory; or (b) at all other times, Seventy Percent
            (70%) of the Cost of Acceptable Inventory (in each case, net of
            Inventory Reserves).

      (d)   Section 2.1(b)(i) shall be amended to add the following after the
end of Section 2.1(b)(i)(B) thereof: "Minus (C) The then Stated Amount of all
L/C's."

      (e)   Section 2.1(b)(ii)(B) shall be amended to add the following after
the end of Section 2.1(b)(ii)(B)(IV): "Plus (V) The lesser of the Committee
Authorized Cash Collateral Loan Amount or the Cash Collateral Amount."

      (f)   Section 2.4(h)(ii) shall be amended to add, in lieu of the period at
the end thereof, the following: "or to seek the issuance of any L/C."

      (g)   The following sentence shall be added to Section 2.1(a): "The Lender
agrees to establish a Cash Collateral Facility, so referred to herein, under the
Revolving Credit, of up to $2,100,000."



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      (h)   Section 2.4 shall be amended to add the following after the end of
clause 2.4(h)(ii) thereof, as new clause 2.4(i): "(i) The Borrower may request
that the Lender cause the issuance of L/C's for the account of the Borrower as
provided in Section 2.17."

      (i)   The following new Sections 2.17, 2.18, and 2.19 are added after the
end of Section 2.16:

            "Section 2.17.Procedures for Issuance of L/C's

            (a)   The Borrower may request that the Lender cause the issuance of
            L/C's for the account of the Borrower. Each such request shall be in
            such manner as may from time to time be acceptable to the Lender.

            (b)   The Lender will endeavor to cause the issuance of any L/C so
            requested by the Borrower, provided that, at the time that the
            request is made, the Revolving Credit has not been suspended as
            provided in Section 2.4(h) and if so issued:

                  (i)   The aggregate Stated Amount of all L/C's then
                        outstanding, does not exceed Two Million Dollars
                        ($2,000,000.00).

                  (ii)  The expiry of the L/C is not later than the earlier of
                        Thirty (30) days prior to the Maturity Date or the
                        following:

                        (A)   Standby's: One (1) year from initial issuance.

                        (B)   Documentary's: Sixty (60) days from issuance.

                  (iii) Borrowing Base would not be exceeded.

            (c)   The Borrower shall execute such documentation to apply for and
            support the issuance of an L/C as may be required by the Issuer.

            (d)   There shall not be any recourse to, nor liability of, the
            Lender on account of:

                  (i)   Any delay or refusal by an Issuer to issue an L/C;

                  (ii)  Any action or inaction of an Issuer on account of or in
                        respect to, any L/C.

            (e)   The Borrower shall reimburse the Issuer for the amount of any
            honoring of a drawing under an L/C on the same day on which such
            honoring takes place. The Lender, without the request of the
            Borrower, may advance under the Revolving Credit (and charge to the
            Loan Account) the amount of any honoring of any L/C and other amount
            for which the Borrower, the Issuer, or the Lender becomes obligated
            on account of, or in respect to, any L/C. Such advance shall be made
            whether or not a Suspension Event is then extant or such advance
            would result in Borrowing Base's being exceeded. Such action shall
            not constitute a waiver of the Lender's rights under Section 2.8(b)
            hereof.



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            2.18. Fees for L/C's

            (a)   The Borrower shall pay to the Lender a fee, on account of
            L/C's, the issuance of which had been procured by the Lender,
            monthly in arrears, and on the Termination Date and on the End Date,
            equal to two and one-half percent (2 1/2 %) per annum of the
            weighted average Stated Amount of all L/C's outstanding during the
            period in respect of which such fee is being paid.

            (b)   In addition to the fee to be paid as provided in Subsection
            2.18(a), above, the Borrower shall pay to the Lender (or to the
            Issuer, if so requested by Lender), on demand, all issuance,
            processing, negotiation, amendment, and administrative fees and
            other amounts charged by the Issuer on account of, or in respect to
            any L/C.

            2.19  Concerning L/C's

            (a)   None of the Issuer, the Issuer's correspondents, or any
            advising, negotiating, or paying bank with respect to any L/C shall
            be responsible in any way for:

                  (i)   The performance by any beneficiary under any L/C of that
                  beneficiary's obligations to the Borrower.

                  (ii)  The form, sufficiency, correctness, genuineness,
                  authority of any person signing; falsification; or the legal
                  effect of; any documents called for under any L/C if (with
                  respect to the foregoing) such documents on their face appear
                  to be in order.

            (b)   The Issuer may honor, as complying with the terms of any L/C
            and of any drawing thereunder, any drafts or other documents
            otherwise in order, but signed or issued by an administrator,
            executor, conservator, trustee in bankruptcy, debtor in possession,
            assignee for the benefits of creditors, liquidator, receiver, or
            other legal representative of the party authorized under such L/C to
            draw or issue such drafts or other documents.

            (c)   Unless otherwise agreed to, in the particular instance, the
            Borrower hereby authorizes any Issuer to:

                  (i)   Select an advising bank, if any;

                  (ii)  Select a paying bank, if any;

                  (iii) Select a negotiating bank;

            (d)   All directions, correspondence, and funds transfers relating
            to any L/C are at the risk of the Borrower. The Issuer shall have
            discharged the Issuer's obligations under any L/C which, or the
            drawing under which, includes payment instructions, by the
            initiation of the method of payment called for in, and in accordance
            with, such instructions (or by any other commercially reasonable and
            comparable method). Neither the Lender



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            nor the Issuers shall have any responsibility for any inaccuracy,
            interruption, error, or delay in transmission or delivery by post,
            telegraph or cable, or for any inaccuracy of translation.

            (e)   The Lender's and the Issuer's rights, powers, privileges and
            immunities specified in or arising under this Agreement are in
            addition to any heretofore or at any time hereafter otherwise
            created or arising, whether by statute or rule of law or contract.

            (f)   Except to the extent otherwise expressly provided hereunder or
            agreed to in writing by the Issuer and the Borrower, the L/C will be
            governed by the Uniform Customs and Practice for Documentary
            Credits, International Chamber of Commerce, Publication No. 500, and
            any subsequent revisions thereof.

            (g)   If any change in any law, executive order or regulation, or
            any directive or any administrative or governmental authority
            (whether or not having the force of law), or in the interpretation
            thereof by any court or administrative or governmental authority
            charged with the administration thereof, shall either:

                  (i)   impose, modify or deem applicable any reserve, special
                  deposit or similar requirements against letters of credit
                  heretofore or hereafter issued by any Issuer or with respect
                  to which the Lender or any Issuer has an obligation to lend to
                  fund drawings under any L/C.; or

                  (ii)  impose on any Issuer any other condition or requirements
                  relating to any such letters of credit;

            and the result of any event referred to in Section 2.19(g)(i) or
            2.19(g)(ii), above, shall be to increase the cost to any Issuer of
            issuing or maintaining any L/C (which increase in cost shall be the
            result of such Issuer's reasonable allocation among that Issuer's
            letter of credit customers of the aggregate of such cost increases
            resulting from such events), then, upon demand by the Lender and
            delivery by the Lender to the Borrower of a certificate of an
            officer of the subject Issuer describing such change in law,
            executive order, regulation, directive, or interpretation thereof,
            its effect on such Issuer, and the basis for determining such
            increased costs and their allocation, the Borrower shall immediately
            pay to the Lender, from time to time as specified by the Lender,
            such amounts as shall be sufficient to compensate such Issuer for
            such increased cost. Any Issuer's determination of costs incurred
            under Section 2.19(g)(i) or 2.19(g)(ii), above, and the allocation,
            if any, of such costs among the Borrower and other letter of credit
            customers of such Issuer, if done in good faith and made on an
            equitable basis and in accordance with such officer's certificate,
            shall be conclusive and binding on the Borrower.

            (h)   The obligations of the Borrower under this Agreement with
            respect to L/C's are absolute, unconditional, and irrevocable and
            shall be performed strictly in accordance with the terms hereof
            under all circumstances, whatsoever including, without limitation,
            the following:



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                  (i)   Any lack of validity or enforceability or restriction,
                  restraint, or stay in the enforcement of this Agreement, any
                  L/C, or any other agreement or instrument relating thereto.

                  (ii)  Any amendment or waiver of, or consent to the departure
                  from, any L/C.

                  (iii) The existence of any claim, set off, defense, or other
                  right which the Borrower may have at any time against the
                  beneficiary of any L/C.

                  (iv)  Any good faith honoring of a drawing under any L/C,
                  which drawing possibly could have been dishonored based upon a
                  strict construction of the terms of the L/C."

      (j)   Section 7.3 shall be amended to add the following after the end of
Section 7.3(d), as new Section 7.3(e): "(e) The Borrower shall establish the
Cash Collateral Account with the Lender or its designee, in which the Lender
shall have a valid, perfected, first-priority security interest, pursuant to the
terms of the Liquidation Order"

      (k)   Section 7.5(c) shall be amended to replace the period at the end
thereof with the following: "provided, however, in the event that both (i) a
Suspension Event has occurred and (ii) one or more L/C's are then outstanding,
the Lender may establish a funded reserve of up to 110% of the aggregate Stated
Amounts of such L/C's."

      (l)   Section 10.13 shall be amended to replace the names "George Newman
or Arlee Jensen" with the name "Bill Lawrence."

      (m)   The EBIDTA covenant in Exhibit 5.12(a) shall be deleted and replaced
by the following:

            EBITDA: The Borrower shall not permit or suffer a EBITDA, tested on
            the last day of each Fiscal month (commencing with the last day of
            Fiscal January 2000) on a cumulative basis, of less than the
            following amounts during the periods indicated:

<TABLE>
<CAPTION>
                      MONTH                     EBITDA
                      -----                     ------
                                         (DENOTES NEGATIVE FIGURE)
<S>                                      <C>
            -------------------------    -------------------------
                    February, 2000             ($600,000)
            -------------------------    -------------------------
                       March, 2000             ($800,000)
            -------------------------    -------------------------
                       April, 2000           ($1,300,000)
            -------------------------    -------------------------
                         May, 2000           ($1,600,000)
            -------------------------    -------------------------
                        June, 2000           ($1,900,000)
            -------------------------    -------------------------
                        July, 2000           ($2,400,000)
            -------------------------    -------------------------
                      August, 2000           ($2,700,000)
            -------------------------    -------------------------
                   September, 2000           ($2,900,000)
            -------------------------    -------------------------
                     October, 2000           ($3,400,000)
            -------------------------    -------------------------
                    November, 2000           ($3,300,000)
            -------------------------    -------------------------
                    December, 2000               $700,000
            -------------------------    -------------------------
                     January, 2001               $300,000
            -------------------------    ------------------------
</TABLE>



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      (n)   The Capital Expenditures covenant in Exhibit 5.12(a) shall be
deleted and replaced by the following: "CAPITAL EXPENDITURES: The Borrower shall
not permit or suffer Capital Expenditures to exceed: (a) $300,000 in any given
quarter, or (b) $600,000, on a rolling twelve (12) month basis."

      (o)   The Business Plan set forth in EXHIBIT 5-12(b) shall be replaced
with the Business Plan described in EXHIBIT 5-12(b)-1 attached hereto.

      2.    Limited Waivers. The Borrower has requested that the Lender waive
its rights and remedies in connection with: (a) the departure of Arlee Jensen
and George Newman which would, absent such waiver constitute an Event of Default
under Section 10.13 of the Loan Agreement; and (b) the Borrower's non-compliance
with the EBITDA financial covenant under Exhibit 5-12(b) for the months of
December 1999 and January 2000. The Lender has agreed that the departure of
those two individuals and the Borrower's non-compliance with the EBITDA
financial covenant under Exhibit 5-12(b) for the months of December 1999 and
January 2000 shall not constitute an Event of Default under the Loan Agreement.
This agreement is limited to this specific request and shall not be deemed or
construed to be a consent to any other or future action or as a waiver of any
other Event of Default that may exist under the Loan Agreement.

      3.    Amendment Fee. Upon the Borrower's execution of this Second
Modification Agreement, Borrower agrees to pay to Lender an amendment fee of
$10,000.00, which fee shall be fully earned and nonrefundable upon Lender's
signing of this Second Modification Agreement.

      4.    Enforceability, Etc. Except as otherwise expressly provided herein,
the Loan Agreement and the other Loan Documents are, and shall continue to be,
in full force and effect and are hereby ratified and confirmed in all respects,
except that on and after the Effective Date hereof (i) all references in the
Loan Agreement to "this Agreement", "hereto", "hereof", "hereunder", or words of
like import referring to the Loan Agreement shall mean the Loan Agreement as
amended by this Agreement and (ii) all references in the other Loan Documents to
the "Loan Agreement", "thereto", "thereof", "thereunder" or words of like import
referring to the Loan Agreement shall mean the Loan Agreement as amended by this
Agreement. Except as expressly provided herein, the execution, delivery and
effectiveness of this Agreement shall not operate as an amendment of any right,
power or remedy of the Lender under the Loan Agreement or any other Loan
Document, nor constitute an amendment of any provision of the Loan Agreement or
any other Loan Documents.

      5.    General Provisions

            a)    Integration; Amendment; Waivers. This Agreement and Loan
                  Documents set forth in full are terms of agreement between the
                  parties and are intended as the full, complete and exclusive
                  contract governing the relationship between the parties,
                  superseding all other discussions, promises, representations,
                  warranties, agreements and the understandings between the
                  parties with respect thereto. No term of the Loan Documents
                  may be modified or amended, nor may any rights thereunder be
                  waived, except in a writing signed by the party against whom
                  enforcement of the modification, amendment or waiver is
                  sought. Any waiver of any condition in, or breach of, any of
                  the foregoing in a particular instance shall not operate as a
                  waiver of other or subsequent conditions or breaches of the
                  same or a different kind. The Lender's exercise or failure to
                  exercise any rights under any of the foregoing in a



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                  particular instance shall not operate as a waiver of its right
                  to exercise the same or different rights in subsequent
                  instances. Except as expressly provided to the contrary in
                  this Agreement, or in another written agreement, all the
                  terms, conditions, and provisions of the Loan Documents shall
                  continue in full force and effect. If in this Agreement's
                  description of an agreement between the parties, rights and
                  remedies of Lender or obligations of the Borrower are
                  described which also exist under the terms of the other Loan
                  Documents, the fact that this Agreement may omit or contain a
                  briefer description of any rights, remedies and obligations
                  shall not be deemed to limit any of such rights, remedies and
                  obligations contained in the other Loan Documents.

            b)    Payment of Expenses. Without limiting the terms of the Loan
                  Documents, the Borrower shall pay all costs and expenses
                  (including reasonable attorneys' fees) arising under or in
                  connection with the Loan Documents, including without
                  limitation, in connection with the negotiation, preparation,
                  execution, delivery, and enforcement of this Agreement and any
                  and all consents, waivers or other documents or instruments
                  relating thereto.

            c)    No Third Party Beneficiaries. Except as may be otherwise
                  expressly provided for herein, this Agreement does not create,
                  and shall not be construed as creating, any rights enforceable
                  by any person not a party to this Agreement.

            d)    Separability. If any provision of this Agreement is held by a
                  court of competent jurisdiction to be invalid, illegal or
                  unenforceable, the remaining provisions of this Agreement
                  shall nevertheless remain in full force and effect.

            e)    Counterparts. This Agreement may be executed in any number of
                  counterparts, which together shall constitute one and the same
                  agreement.

            f)    Time of Essence. Time is of the essence in each of the
                  Liabilities of the Borrower and with respect to all conditions
                  to be satisfied by the Borrower.

            g)    Construction; Voluntary Agreement; Representation by Counsel.
                  This Agreement has been prepared through the joint efforts of
                  all the parties. Neither its provisions nor any alleged
                  ambiguity shall be interpreted or resolved against any party
                  on the ground that such party's counsel was the draftsman of
                  this Agreement. Each of the parties declares that such party
                  has carefully read this Agreement and the agreements,
                  documents and instruments being entered into in connection
                  herewith and that such party knows the contents thereof and
                  sign the same freely and voluntarily. The parties hereto
                  acknowledge that they have been represented in negotiations
                  for and preparation of this Agreement and the agreements,
                  documents and instrument being entered into in connection
                  herewith by legal counsel of their own choosing, and that each
                  of them has read the same and had their contents fully
                  explained by such counsel and is fully aware of their contents
                  and legal effect.



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            h)    Governing Law; Forum Selection. This Agreement has been
                  entered into and shall be governed by the laws of the
                  Commonwealth of Massachusetts.

            i)    Further Assurances. The Borrower agrees to take all further
                  actions and execute all further documents as the Lender may
                  from time to time reasonably request to carry out the
                  transactions contemplated by this Agreement.

            j)    Notices. All notices, requests and demands to or upon the
                  respective parties hereto shall be given in accordance with
                  the Loan Agreement.

            k)    Mutual Waiver of Right to Jury Trial. THE LENDER AND BORROWER
                  EACH HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
                  PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING
                  TO: (I) THIS AGREEMENT, OR ANY OF THE AGREEMENTS, INSTRUMENTS
                  OR DOCUMENTS REFERRED TO HEREIN; OR (II) ANY OTHER PRESENT OR
                  FUTURE INSTRUMENT OR AGREEMENT BETWEEN THEM; OR (III) ANY
                  CONDUCT, ACTS OR OMISSIONS OF THE LENDER OR OF THE BORROWER OR
                  ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS
                  OR ANY OTHER PERSONS AFFILIATED WITH THEM; IN EACH OF THE
                  FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
                  OTHERWISE.

            l)    Copies and Facsimiles. This Agreement and all documents which
                  have been or may be hereinafter furnished by the Borrower to
                  the Lender may be reproduced by the Lender by any
                  photographic, photostatic, microfilm, xerographic or similar
                  process, and any such reproduction shall be admissible in
                  evidence as the original itself in any judicial or
                  administrative proceeding (whether or not the original is in
                  existence and whether or not such reproduction was made in the
                  regular course of business).



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      This Second Modification Agreement is executed under seal as of the date
written above.

                                          Borrower:
                                                Garden Botanika, Inc.


                                                By: ___________________________
                                                Name:
                                                Title:


                                    Accepted:  Fleet Retail Finance Inc.


                                                By: ___________________________
                                                Name:
                                                Title:



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                                EXHIBIT 5-12(b)-1


           The Business Plan for purposes of Exhibit 5-12(b)-1 is the
         "Financial Forecast and Business Plan Prepared for BankBoston"
 dated December 29, 1999 and previously delivered by the Borrower to the Lender.



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