<PAGE>
 
                                                                   EXHIBIT 10.68
                       AGREEMENT FOR PURCHASE OF ASSETS
                       --------------------------------


          THIS AGREEMENT FOR PURCHASE OF ASSETS is made and effective as of the
twenty-second day of February, 1999, by and among TARRANT MEXICO, S. de R.L. de
C.V., a corporation organized under the laws of the Republic of Mexico (the
"Purchaser"), JAMIL TEXTIL, S.A. de C.V. and  INMOBILIARIA CUADROS, S.A. de
C.V., corporations organized under the laws of the Republic of Mexico
(collectively, the "Sellers"), and KAMEL NACIF and IRMA BENAVIDES MONTES DE OCA
(collectively, the "Shareholders"), with respect to the following facts:

     A.   The Sellers are engaged in the production of denim and the
manufacturing of apparel, among other businesses.

     B.   The Shareholders own all the issued and outstanding capital stock of
the Sellers.

     C.   The Purchaser is a wholly-owned, indirect subsidiary of Tarrant
Apparel Group, a California corporation (the "Parent").

     D.   The Purchaser desires to purchase from the Sellers, and the Sellers
desire to sell to the Purchaser, certain assets, all upon the terms and
conditions contained herein.

          ACCORDINGLY, subject to the terms and conditions of this Agreement,
and on the basis of the premises, representations, warranties and agreements
contained herein, the parties hereto agree as follows:

          1.   PURCHASE AND SALE OF ASSETS
               ---------------------------

          1.1  Purchase and Sale.
               ----------------- 

               (a) Except as provided in Section 1.1(b), the Sellers shall sell,
assign, transfer, convey and deliver to the Purchaser, and the Purchaser shall
purchase and take from the Sellers, on the Closing Date (as defined below), all
property and assets of the Sellers which are used in connection with the
production of denim, as the same shall exist on the Closing Date (the "Assets"),
including, but not limited to, the property and assets set forth on Schedule
                                                                    --------
1.1(a).
------ 

               (b) Notwithstanding Section 1.1(a), the Sellers shall not sell,
assign, transfer, convey or deliver to the Purchaser hereunder, and shall
retain, the property and assets of the Sellers set forth on Schedule 1.1(b).
                                                            --------------- 

          1.2  Purchase Price.
               -------------- 

               (a) In consideration of the sale of the Assets to the Purchaser,
the Purchaser shall pay or deliver to the Sellers the following (the "Purchase
Price") (subject to adjustment as provided in Section 1.3(d)):

                    (i)  the sum of U.S. $22,000,000.00 evidenced by a 
          promissory note (the "Note") of the Purchaser in the form attached 
          hereto as Exhibit D; and

                   (ii)  a purchase price premium of up to 2,000,000 shares (the
          "Shares") of the Common Stock of the Parent shall be delivered to, and
          earned by the Seller on the terms set forth in the Escrow Agreement
          (as defined below).

               (b) The Purchase Price shall be allocated between the Sellers as
set forth on Schedule 1.2(b)A and shall be allocated among the Assets as set
             ----------------
forth on Schedule 1.2(b)B.
         ---------------- 

                                       1
<PAGE>
 
          1.3  Assumption of Liabilities.
               ------------------------- 

               (a) Except as provided in Section 1.3(c), the Purchaser shall
purchase and take the Assets free and clear of all liens, claims, charges,
encumbrances, security interests, equities, restrictions on use, liabilities,
obligations, expenses and debts ("liabilities"), known and unknown, whether
absolute, contingent, accrued or otherwise, including, but not limited to, those
liabilities set forth in Schedule 1.3(a).
                         --------------- 

               (b) The Sellers and the Shareholders, jointly and severally,
shall pay or perform, and shall defend, indemnify and hold harmless the
Purchaser from, any and all liabilities which arise or result from or are
related to, directly or indirectly, the Assets or the business or operations
with the Sellers or the Shareholders, or any of them, whether the same arise
before or after the Closing Date, other than those liabilities expressly assumed
by the Purchaser under Section 1.3(c).

               (c) Notwithstanding anything to the contrary contained in this
Section 1.3, the Purchaser shall assume, perform and hold the Sellers harmless
from those liabilities set forth on Schedule 1.3(c) (other than such liabilities
                                    ---------------
as are payable on or before the Closing Date or as to which the Sellers are then
in default).

               (d) The Purchaser shall have the right, but not the obligation,
to pay any amount or to perform any obligations which the Purchaser, in its sole
and absolute discretion, determines is payable or is required to be performed by
the Sellers or the Shareholders under that certain Contrato Colectivo de
Trabajo, dated May 22, 1997, between Jamil Textil, S.A. de C.V. and Sindicato
Industrial de Obreros Textiles y Similares (the "Collective Bargaining
Agreement"). The Purchase Price shall be reduced by any such amount paid or the
cost to the Purchaser of any such obligation performed. The Purchaser shall have
the right (i) to set off any such amount or cost against any portion of the
Purchase Price then payable or (ii) to demand that the Sellers and the
Shareholders reimburse the Purchaser therefor promptly on demand, and the
Sellers and the Shareholders, jointly and severally, shall do so.

          1.4  Delivery of Assets.
               ------------------ 

               (a) Delivery of possession of the Assets shall be deemed to have
occurred for all purposes at 11:59 P.M. (local time) on the day before the
Closing Date, and all risk of loss, whether or not covered by insurance, shall
be on the Sellers until such date and time and on the Purchaser thereafter.

               (b) On the Closing Date, the Sellers shall deliver to the
Purchaser at the Plant physical possession of the Assets wherever located. With
respect to any Assets which cannot be physically delivered because they are in
the possession of third parties, or otherwise, the Sellers shall give
irrevocable instructions to the party in possession thereof that all right,
title and interest in and to the same shall have been vested in the Purchaser,
and shall take such further action and execute and deliver such further
documents, at the Sellers' sole cost and expense, as the Purchaser reasonably
may request to cause any such person to deliver any Assets held by it to the
Purchaser at the Plant. The term "Plant" shall mean that certain denim mill
located at Lote 5, 6, 7 y 15, Calle "C" Mant. 6, ParqueInd. Puebla 2000, Puebla,
Mexico, capable of producing 20 million meters per year of 68" OE/OE denim
fabric.

               (c) On the Closing Date, and from time to time thereafter, at the
request of the Purchaser, the Sellers and the Shareholders shall execute and
deliver to the Purchaser all such deeds, bills of sale, endorsements,
assignments, consents and other documents and instruments of conveyance,
transfer, assignment and further assurances as shall be necessary or desirable,
in the reasonable opinion of counsel to the Purchaser, to vest in or to confirm
in the Purchaser good title in and to the Assets.  On the Closing Date, and from
time to time thereafter, at the request of the Sellers, the Purchaser shall
execute and deliver to the Sellers all such instruments of assumption as shall
be necessary or desirable, in the reasonable opinion of counsel to the Sellers,
to reflect the assumption by the Purchaser of those liabilities of the Sellers
expressly assumed by the Purchaser under Section 1.3(c).

                                       2
<PAGE>
 
          1.5  Closing.  The purchase and sale of the Assets contemplated by
               -------                                                      
this Agreement shall take place at 10:00 A.M. (local time) on the third business
day after the conditions set forth in Section 5 have been satisfied or waived at
the offices of Sheppard, Mullin, Richter & Hampton LLP located at 333 South Hope
Street, 48th Floor, Los Angeles, California  90071, or at such other time or
place as may be mutually agreed upon by the parties in writing.  The date on
which the purchase and sale of the Assets contemplated by this Agreement shall
take place is referred to herein as the "Closing Date."  The obligation of any
party to consummate the purchase and sale of the Assets contemplated by this
Agreement may be terminated by such party after March 31, 1999, if such purchase
and sale shall not have occurred by the close of business on that date,
providing the terminating party is not in default of any of its obligations
hereunder.  On the Closing Date, the Sellers and the Shareholders shall deliver
to the Purchaser the Assets in accordance with Section 1.4(b) and the
instruments of transfer referred to in Section 1.4(c), against receipt of the
Purchase Price (subject,  in the case of the Shares, to the terms of the Escrow
Agreement) and the instruments of assumption referred to in Section 1.4(c).  All
deliveries shall be considered to have taken place simultaneously as a single
transaction, and no delivery shall be considered to have been made until all
deliveries are completed.

          2.   REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE
               -----------------------------------------------------
SHAREHOLDERS
------------

          The Sellers and the Shareholders, jointly and severally, hereby
represent and warrant to the Purchaser that the statements set forth in Sections
2.1 through 2.19 are true and correct.

          2.1  Authority to Enter Agreement and Enforceability.  The Sellers and
               -----------------------------------------------                  
the Shareholders each has all requisite right, power and authority to execute,
deliver and perform its or his respective obligations under this Agreement and
the other agreements and instruments contemplated hereby, including, but not
limited to, the sale, assignment, transfer, conveyance and delivery of the
Assets to the Purchaser, without obtaining the approval or consent of any other
party, governmental body or authority, other than as described in Section
5.1(k); all proceedings have been taken and all authorizations have been secured
by the Sellers and the Shareholders which are necessary to authorize the
execution, delivery and performance of this Agreement and the other agreements
and instruments contemplated hereby; and this Agreement and each of the other
agreements and instruments contemplated hereby is a legal, valid and binding
agreement of the Sellers and the Shareholders and is enforceable against each of
them in accordance with its terms.

          2.2  Organization and Standing.  Each of the Sellers is a corporation
               -------------------------                                       
duly organized, validly existing and in good standing under the laws of the
Republic of Mexico, with all requisite power and authority (corporate and other)
to own, lease and operate its property and assets as now owned, leased or
operated and to carry on its businesses as now conducted, and is duly qualified
to do business and is in good standing in each jurisdiction in which the conduct
of its businesses or the ownership, lease or use of its properties makes such
qualification necessary.

          2.3  Ownership of Shares.  The Shareholders own all the issued and
               -------------------                                          
outstanding shares of the capital stock of the Sellers free and clear of any
liens, claims, encumbrances, security interests, equities, restrictions on
transfer, preemptive rights or other defects in title of any kind or
description.  There are no options, warrants, rights or other agreements or
commitments outstanding or in existence which provide for the issuance of
capital stock or other securities of the Sellers, and there are no securities
outstanding or in existence which are convertible into or exchangeable for
capital stock or other securities of the Sellers.

          2.4  Financial Data.  Schedule 2.4A hereto contains a statement of the
               --------------   -------------                                   
salaries of all employees of the Sellers as of the date hereof.  Schedule 2.4B
                                                                 -------------
hereto contains a true and complete list of all liabilities or obligations of
the Sellers, whether contingent or absolute, direct or indirect, matured or
unmatured, as of the date hereof, and neither the Sellers nor the Shareholders
knows of any basis for the assertion of any such liabilities or obligations
which are not set forth on Schedule 2.4B.    Such schedules (i) were compiled
                           -------------                                     
from the accounting books and records of the Sellers and (ii) accurately and
completely set forth the information contained in such accounting books and
records with respect to the salaries and liabilities set forth thereon.

                                       3
<PAGE>
 
          2.5  Trademarks, Patents, Etc.  The Sellers use and own no trade
               ------------------------                                   
names, trademarks, patents, copyrights or registrations or applications therefor
in connection with, and none is required for, the production of denim by means
of the Assets.  The Sellers are not infringing any trade name, trademark,
patent, copyright or other right of any third party in connection with its denim
production business.

          2.6  Tax Matters.  The Sellers have properly prepared and filed
               -----------                                               
returns for and paid in full all federal, state, local and foreign taxes,
assessments and penalties to the extent such filings and payments are required
prior to the date hereof, and there is no outstanding or proposed deficiency by
any federal, state, local or foreign government with respect to any tax period.
As of the date hereof, the Sellers are not the beneficiary of any extension of
time to file any tax return or pay any taxes and have no liability with respect
to taxes of any kind, whether or not assessed.  The Sellers have properly
registered before all federal, state and local tax authorities and the Instituto
Mexicano del Seguro Social ("IMSS"), Instituto del Fondo Nacional Para La
Vivienda de Los Trabajadores ("Infonavit"), Fondo Nacional Para El Consumo de
Los Trabajadores ("Fonacot") and Sistema de Ahorro Para El Retiro ("SAR").  The
term "taxes" shall include, but is not limited to, income taxes, value added
taxes, asset taxes, payroll taxes, import duties, real property taxes,
contributions payments and assessments regarding IMSS, Infonavit, Fonacot and
SAR.

          2.7  Insurance.  The Sellers maintain, and will maintain from the date
               ---------                                                        
hereof to the Closing Date, in full force and effect insurance policies with
financially sound and reputable insurers on the Assets of a character usually
insured by companies engaged in the same or similar businesses against loss or
damage of the kinds and in the amounts customarily insured against by such
companies.

          2.8  Litigation.  There are no suits, actions or legal,
               ----------                                        
administrative, arbitration or other proceedings or investigations pending or
threatened by, against or involving the Sellers or, with respect only to those
suits, actions, proceedings or investigations arising out of the Sellers'
business, pending or threatened by, against or involving the Shareholders or any
of the Sellers' officers, directors, shareholders, employees or agents.

          2.9  Compliance with Laws and Other Instruments.  Except as set forth
               ------------------------------------------                      
in Schedule 2.13, the Sellers' businesses have been and are being conducted in
   -------------                                                              
accordance with all applicable laws, ordinances, rules and regulations of all
authorities.  The Sellers are not in violation of, or in default under, any term
or provision of their respective Escritura Constitutiva or Estatutos Sociales
(as amended or revised) or of any lien, indenture, mortgage, lease, agreement,
instrument, commitment or other arrangement, or subject to any restriction of
any kind or character, which could adversely affect the Sellers' businesses or
the Assets.  The execution and delivery of this Agreement and the other
agreements and instruments contemplated hereby, and the consummation of the
transactions contemplated herein and therein, will not conflict with or result
in the breach of any term or provision of, or constitute a default under, the
respective Escritura Constitutiva or Estatutos Sociales (as amended or revised)
of the Sellers, or any statute, order, judgment, writ, injunction, decree,
license, permit, approval, authorization, rule or regulation of any court or any
governmental or regulatory body, or any agreement, lease, contract, document,
instrument, commitment, obligation or arrangement of any kind or nature to which
it is a party or by which either of the Sellers is bound.

          2.10 Brokerage and Finder's Fees.  The Sellers and the Shareholders
               ---------------------------                                   
have not incurred any liability to any broker, finder or agent for any brokerage
fees, finder's fees or commissions with respect to the transactions contemplated
by this Agreement.

          2.11 Employment Agreements.  Schedule 2.11 contains a complete and
               ---------------------   -------------                        
correct list of all agreements with employees or independent contractors not
cancelable at will and all employee benefit plans, including, but not limited
to, (i) any collective bargaining agreement, (ii) any agreement or plan which
contains any obligation, liability or commitment for any vacation pay, severance
or termination pay, sick or disability pay, pension or retirement benefits,
bonuses or profit sharing, deferred or delayed wages of any kind, commissions or
incentive compensation or (iii) any group medical, dental, vision, health,
hospitalization or disability insurance plans, relating to the production of
denim by means of the Assets, or to any person employed in connection therewith.
The Sellers have performed all of their obligations required to be performed
under all such agreements and plans, and 

                                       4
<PAGE>
 
is not in default or in arrears under any of the respective terms thereof. The
Sellers' relationship with all employees or independent contractors is
satisfactory.

          2.12 Inventories.  All inventory of the Sellers, including, but not
               -----------                                                   
limited to, raw materials, work in process and finished goods, are of good,
usable and merchantable quality.

          2.13 Environmental Matters.
               --------------------- 

               (a) Except as set forth on Schedule 2.13, the Sellers have not
                                          -------------
(i) breached or been notified by any governmental or regulatory authority that
they have breached any Environmental Law (as defined below), (ii) released any
Hazardous Substance (as defined below) or (iii) become aware of the release or
presence of any Hazardous Substance on any property owned, leased or occupied by
the Sellers. There are no underground storage tanks on property owned, leased or
occupied by the Sellers.

               (b) For purposes of this Section 2.13, (i) "Environmental Law"
means all laws relating to the protection of the environment, to human health
and safety or to any environmental activity, including, without limitation, (x)
Ley General del Equilibrio Ecologico y La Proteccion al Ambiente, its related
regulations and administrative orders or provisions, including, but not limited
to, those pertaining to environmental impact, hazardous waste, air pollution,
water pollution or noise pollution, and any other specific laws, regulations or
administrative orders or provisions relating to air, soil, ground or water
pollution or contamination, (y) all other requirements pertaining to the
reporting, licensing, permitting, investigation or remediation of emissions,
discharges, releases or threatened releases of any Hazardous Substance into the
air, surface water, groundwater or land, or relating to the manufacture,
processing, distribution, use, sale, treatment, receipt, storage, disposal,
transport or handling of any Hazardous Substance and (z) all other requirements
pertaining to the protection of the health and safety of employees or the
public, and (ii) "Hazardous Substance" means any substance that (x) is or
contains asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum or petroleum-derived substances or wastes, radon gas or related
materials, (y) requires investigation, removal or remediation under any
Environmental Law, or is defined, listed or identified as a "hazardous waste" or
"hazardous substance" thereunder or (z) is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous or is regulated by any governmental authority or Environmental Law.

          2.14 Employees.  The Sellers have fully complied with its obligations
               ---------                                                       
under the Ley Federal de Trabajo, including, but not limited to, the timely
payment in full of all wages,  salaries, overtime payments, vacation and
vacation bonus payments, seventh day payments, severance payments, holiday
payments, Sunday work bonuses, seniority bonuses and annual bonuses
("aguinaldo") and the timely performance in full of all obligations relating to
health and safety, training, internal regulations, working conditions and any
other legally or contractually mandated fringe benefits or obligations.

          2.15 Assets.  Schedule 2.15 contains a complete and correct list of
               ------   -------------                                        
all assets (including, but not limited to, all real property, machinery,
furniture, fixtures, equipment and other tangible assets) used in, or necessary
for the conduct of, the Sellers' denim production business as presently
conducted, other than any item the original cost of which was less than U.S.
$500.  All such assets are owned or leased by the Sellers free and clear of all
liens, claims, charges, encumbrances, security interests, equities or
restrictions on use of any kind or nature (collectively, "Liens") and are in
good working condition and repair (subject to normal wear and tear) and are
adequate for their intended uses.  Each of the leases pursuant to which the
Sellers hold any such assets is in full force and effect and is a legal, valid
and binding agreement of each party thereto and is enforceable against each
party thereto in accordance with its terms; each party to any such lease is in
compliance thereunder; and no event has occurred which through the giving of
notice or the lapse of time could cause or constitute a default or the
acceleration of any obligation of any party thereto or the creation of a Lien
upon any such asset.  Upon the Closing Date, the Purchaser will receive from the
Sellers good and marketable title to the Assets free and clear of any Liens.

          2.16 Agreements.  Schedule 2.16 contains a complete and correct list
               ----------   -------------                                     
of all leases, contracts, agreements and commitments, whether written or oral,
to which either of the Sellers is a party or by which it is bound. Each such
agreement is in full force and effect and is a legal, valid and binding
agreement of each party 

                                       5
<PAGE>
 
thereto and is enforceable against each party thereto in accordance with its
terms; each party thereto is in compliance thereunder; and no event has occurred
which through the giving of notice or the lapse of time could cause or
constitute a default or the acceleration of any obligation of any party thereto
or the creation of a lien or encumbrance upon the Assets.

          2.17 Absence of Certain Changes.  Since January 1, 1998, there has not
               --------------------------                                       
been any material adverse change in the condition (financial or other), net
worth, property, assets, earnings, liabilities, capitalization, business,
results of operations or prospects of either of the Sellers or the Assets.

          2.18 Investment in the Shares.
               ------------------------ 

               (a) The Sellers will hold the Shares for investment and not with
a view to, or for resale in connection with, any distribution thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"). The
Sellers do not have any present intention of selling, offering to sell or
otherwise disposing of or distributing the Shares.

               (b) The Sellers acknowledge that the Purchaser has disclosed that
the Shares have not been registered under the Securities Act and, therefore,
cannot be resold unless they are registered under the Securities Act or unless
an exemption from registration is available.

               (c) The Sellers are sophisticated in financial matters and are
able to evaluate the risks and benefits of the investment in the Shares.

               (d) The Sellers have had an opportunity to ask questions and
receive answers concerning the terms and conditions of the acquisition of the
Shares and have had full access to such other information concerning the Parent
as they have requested.

               (e) The Sellers are able to bear the economic risk of their
investment in the Shares for an indefinite period of time, recognizing that the
Shares have not been registered under the Securities Act and, therefore, cannot
be sold unless subsequently registered under the Securities Act or an exemption
from such registration is available.

               (f) The Sellers acknowledge that until such time as the Shares
have been registered, or are otherwise eligible, for resale in accordance with
the Securities Act, each certificate representing the Shares shall be endorsed
with the following legend:

          THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
          REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
          STATE SECURITIES LAWS, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
          PLEDGED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE FIRST BEEN
          REGISTERED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
          UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THE
          CORPORATION SHALL HAVE RECEIVED, AT THE EXPENSE OF THE HOLDER,
          EVIDENCE OF SUCH EXEMPTION REASONABLY SATISFACTORY TO THE CORPORATION
          (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN OPINION OF COUNSEL
          SATISFACTORY TO THE CORPORATION).

          2.19 Material Misstatements or Omissions.  No representations,
               -----------------------------------                      
warranties or information furnished by the Sellers or the Shareholders to the
Purchaser, the Parent or any of their respective employees or agents, including,
but not limited to, Ernst & Young LLP or Kurt Salmon Associates, in connection
with the transactions contemplated hereby contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
and facts contained therein not misleading.

                                       6
<PAGE>
 
          3.   REPRESENTATION AND WARRANTIES OF THE PURCHASER
               ----------------------------------------------

          The Purchaser represents and warrants to the Sellers and the
Shareholders that the statements set forth in Sections 3.1 through 3.3 hereof
are true and correct.

          3.1  Authority to Enter Agreement and Enforceability.  The Purchaser
               -----------------------------------------------                
has all requisite right, power and authority to execute, deliver and perform its
obligations under this Agreement and the other agreements and instruments
contemplated hereby without obtaining the approval or consent of any other
party, governmental body or authority, other than as described in Section
5.1(k); all proceedings have been taken and all authorizations have been secured
by the Purchaser which are necessary to authorize the execution, delivery and
performance of this Agreement and the other agreements and instruments
contemplated hereby; and this Agreement and each of the other agreements and
instruments contemplated hereby is a legal, valid and binding agreement of the
Purchaser and is enforceable against it in accordance with its terms.

          3.2  Compliance with the Law and other Instruments.  The execution and
               ---------------------------------------------                    
delivery of this Agreement and the other agreements and instruments contemplated
hereby, and the consummation of the transactions contemplated herein and therein
will not conflict with or result in the breach of any term or provision of, or
constitute a default under any statute, order, judgment, writ, injunction,
decree, license, permit, approval, authorization, rule or regulation of any
court or any governmental or regulatory body, or any agreement, lease, contract,
document, instrument, commitment, obligation or arrangement of any kind or
nature to which the Purchaser is a party or by which it is bound.

          3.3  Brokerage and Finder's Fees.  The Purchaser has not incurred any
               ---------------------------                                     
liability to any broker, finder or agent for any brokerage fees, finder's fees
or commissions with respect to the transactions contemplated by this Agreement.

          4.   COVENANTS
               ---------

          4.1  Operation of the Assets.  During the period from the date of this
               -----------------------                                          
Agreement to the Closing Date, the Sellers shall operate their businesses and
the Assets as now operated and only in the ordinary course and shall take such
actions as may be necessary to ensure that the representations and warranties of
the Sellers set forth in this Agreement will be true and correct as of the
Closing Date, and the Shareholders shall cause the Sellers to do so.  By way of
illustration only and not limitation, the Sellers shall take each such action as
is set forth in Schedule 4.1 hereto, and the Shareholders shall cause the
                ------------                                             
Sellers to do so.

          4.2  Access to Information.  The Sellers and the Shareholders shall
               ---------------------                                         
give to the Purchaser and its counsel, accountants and other representatives
full access during normal business hours throughout the period from the date of
this Agreement to the Closing Date to all of its property, assets, books and
records and all employees, independent contractors and agents, and shall furnish
the Purchaser during such period with all such information concerning their
businesses or the Assets as the Purchaser may request, and the Shareholders
shall cause the Sellers to do so.  No investigation or inquiry made by or on
behalf of the Purchaser hereunder shall in any way affect or lessen the
representations and warranties made by the Sellers and the Shareholders under
this Agreement.

          4.3  Environmental Matters.  On or before December 31, 1999, the
               ---------------------                                      
Sellers shall (i) remedy any breach of any Environmental Law arising before the
Closing Date in connection with or related to the Assets, the Plant or the
Sellers' denim production business, including, but not limited to, those
breaches of Environmental Laws set forth on Schedule 2.13 or (ii) obtain the
                                            -------------                   
release of any liability therefor from the appropriate governmental or
regulatory authority, in each case without any material condition or restriction
on the operation of the Plant, which remedy or release shall be acceptable to
the Purchaser in all material respects.

          5.   CONDITIONS PRECEDENT
               --------------------

                                       7
<PAGE>
 
          5.1  Conditions Precedent to the Obligations of the Purchaser.  The
               --------------------------------------------------------      
obligation of the Purchaser to consummate the transactions contemplated by this
Agreement is expressly subject to the following conditions (compliance with
which or the occurrence of which may be waived in whole or in part by the
Purchaser in writing):

               (a) All representations and warranties of the Sellers and the
Shareholders contained in this Agreement shall be true and correct in all
respects on the date hereof and as of the Closing Date as if made at and as of
such date.

               (b) The Sellers and the Shareholders each shall have performed
and satisfied all covenants and conditions required by this Agreement to be
performed or satisfied by it or him on or prior to the Closing Date.

               (c) No action or proceeding shall have been instituted or
threatened prior to or at the Closing Date or, in the reasonable opinion of
counsel to the Purchaser, is likely to be instituted before any court or
governmental body or authority the result of which could prevent or make illegal
the consummation of the transactions contemplated hereunder, or which could
adversely affect the Purchaser's use of the Assets.

               (d) The Sellers shall have executed and delivered to the
Purchaser an escrow and registration rights agreement in the form of and
containing the terms and con ditions set forth in Exhibit A hereto (the "Escrow
                                                  ---------
Agreement"). 

               (e) Kamel Nacif shall have executed and delivered to the
Purchaser an employment agreement in the form of and containing the terms and
conditions set forth in Exhibit B hereto (the "Employment Agreement").
                        ---------                                     

               (f) Jamil Textil, S.A. de C.V. shall have executed and delivered
to the Purchaser an agreement in the form of and containing the terms and
conditions set forth in Exhibit C (the "Individual Work Contract").
                        ---------                                  

               (g) There shall not have occurred any adverse change in the
business, property, assets, operations, condition (financial or other) or
prospects of the businesses of the Sellers or the Assets.

               (h) The Board of Directors of the Parent, in its good faith
judgment, after consultation with legal counsel, shall not have withdrawn or
modified its approval or recommendation of this Agreement and the transactions
contemplated hereby (having determined that it is necessary to do so to comply
with its fiduciary duties to the shareholders of the Parent under applicable
law).

               (i) The Shares shall have been approved for listing on the Nasdaq
National Market subject to official notice of issuance.

               (j) The Parent shall have received the opinion of Wedbush Morgan
Securities ("Wedbush") on the date on which the Parent's Board of Directors
voted to approve this Agreement and the written opinion of Wedbush, dated on the
Closing Date, that the terms of the transactions contemplated by this Agreement
are fair to the Parent and its shareholders from a financial point of view, and
such opinion shall not have been withdrawn or modified in any respect.

               (k) The Sellers, the Shareholders and the Purchaser each shall
have obtained any required prior approval of the transactions contemplated
hereby from the Federal Competition Commission pursuant to Article 12, I, Ley
Federal de Competencia Economica.

          5.2  Conditions Precedent to the Obligations of the Sellers and the
               --------------------------------------------------------------
Shareholders.  The obligation of the Sellers and the Shareholders to consummate
------------                                                                   
the transactions contemplated by this Agreement is expressly subject to the
following conditions (compliance with which or the occurrence of which may be
waived in whole or in part by the Sellers or the Shareholders, as the case may
be, in writing):

                                       8
<PAGE>
 
               (a) All representations and warranties of the Purchaser contained
in this Agreement shall be true and correct in all respects on the date hereof
and as of the Closing Date as if made at and as of such date.

               (b) The Purchaser shall have performed and satisfied all
covenants and conditions required by this Agreement to be performed or satisfied
by it on or prior to the Closing Date.

               (c) No action or proceeding shall have been instituted or
threatened prior to or at the Closing Date or, in the reasonable opinion of
counsel to the Sellers or the Shareholders, is likely to be instituted before
any court or governmental body or authority the result of which could prevent or
make illegal the consummation of the transactions contemplated hereunder.

               (d) The Purchaser shall have executed and delivered to the
Sellers and the Shareholders the Escrow Agreement, the Employment Agreement and
the Individual Work Contract.

               (e) The Sellers, the Shareholders and the Purchaser each shall
have obtained any required prior approval of the transactions contemplated
hereby from the Federal Competition Commission pursuant to Article 12, I, Ley
Federal de Competencia Economica.

          6.   MISCELLANEOUS
               -------------

          6.1  Survival of Representations, Warranties and Agreements.  All
               ------------------------------------------------------      
representations, warranties and agreements made by the parties in this Agreement
(including, but not limited to, statements contained in any exhibit,  schedule
or certificate or other instrument delivered by or on behalf of any party hereto
or in connection with the transactions contemplated hereby) shall survive the
Closing Date notwithstanding any investigations, inspections, examinations or
audits made by or on behalf of any party.

          6.2  Indemnification.   The Sellers and the Shareholders (the
               ---------------                                         
"Indemnifying Parties"), jointly and severally, shall indemnify, defend and hold
harmless the Parent, the Purchaser and their respective officers, directors,
shareholders, employees, attorneys, accountants, affiliates, agents, successors
and assigns, and any person who controls or is deemed to control any of them
(the "Indemnified Parties"), from, against and in respect of any and all
payments, damages, claims, demands, losses, expenses, costs, obligations and
liabilities (including, but not limited to, reasonable attorneys' fees and
costs, and the costs of investigation and preparation) (a "Loss") which,
directly or indirectly, arise or result from or are related to any breach by any
of the Indemnifying Parties of any of its or his representations, warranties,
covenants or commitments under this Agreement, the Escrow Agreement, the
Employment Agreement or the Individual Work Contract.  The Indemnifying Parties,
jointly and severally, shall reimburse each Indemnified Party on demand for any
payment made or loss suffered by it at any time after the date hereof, based
upon the judgment of any court of competent jurisdiction or pursuant to a bona
fide compromise or settlement of claims, demands or actions in respect of any
damages to which the foregoing indemnity relates. Consummation of the
transactions contemplated hereunder shall not be deemed or construed to be a
waiver of any right or remedy of any Indemnified Party, nor shall this section
or any other provision of this Agreement be deemed or construed to be a waiver
of any ground of defense by it.  The obligation to advance or pay promptly on
demand all amounts as they are incurred shall exist irrespective of the ultimate
final judicial determination, and in the event of a dispute about amounts owed,
such amounts shall be advanced as they are incurred pending resolution and final
judicial determination.  The Indemnifying Parties' obligations hereunder shall
be in addition to any liability that they or any other person otherwise may have
to the Indemnified Parties, and shall be binding upon, and inure to the benefit
of, their heirs, representatives,  successors and assigns, and shall inure to
the benefit of the heirs, representatives, successors and assigns of each
Indemnified Party.

          6.3  Third-Party Claims.  The Indemnified Party shall promptly notify
               ------------------                                              
the Indemnifying Parties of the existence of any claim, demand or other matter
involving liabilities to third parties to which the Indemnifying Parties'
indemnification obligations could apply and shall give the Indemnifying Parties
a reasonable opportunity to defend the same at their expense and with counsel of
their own selection (who shall be approved by

                                       9
<PAGE>
 
the Indemnified Party, which approval shall not be withheld unreasonably);
provided, however, that (i) the Indemnified Party shall at all times
--------                       
 also have the right to fully participate in the defense at its own expense,
(ii) if, in the reasonable judgment of the Indemnified Party, based upon the
written advice of counsel, a conflict of interest may exist between the
Indemnified Party and any of the Indemnifying Parties, the Indemnifying Parties
shall not have the right to assume such defense on behalf of such Indemnified
Party and (iii) the failure to so notify the Indemnifying Parties shall not
relieve the Indemnifying Parties from any liabilities that they may have
hereunder or otherwise, except to the extent that such failure so to notify the
Indemnifying Parties materially prejudices the rights of the Indemnifying
Parties. If the Indemnifying Parties shall, within a reasonable time after said
notice, fail to defend, the Indemnified Party shall have the right, but not the
obligation, to undertake the defense of, and to compromise or settle the claim
or other matter on behalf, for the account and at the risk and expense of the
Indemnifying Parties. The Indemnifying Parties shall not compromise or settle
the claim or other matter without the prior written consent of the Indemnified
Parties. If the claim is one that cannot by its nature be defended solely by the
Indemnifying Parties, the Indemnified Parties shall make available all
information and assistance that the Indemnifying Parties may reasonably request;
provided, however, that any associated expenses shall be paid by the 
--------                   
Indemnifying Parties as incurred.

          6.4  Notices. Any notice or other communication required or permitted
               -------                                                         
hereunder shall be in writing in the English language and shall be deemed to
have been given (i) if personally delivered, when so delivered, (ii) if mailed,
one (1) week after being placed in the United States mail, registered or
certified, postage prepaid, addressed to the party to whom it is directed at the
address set forth on the signature page hereof or (iii) if given by telecopier,
when such notice or communication is transmitted to the telecopier number set
forth on the signature page hereof and written confirmation of receipt is
received.  Each of the parties shall be entitled to specify a different address
by giving the other parties notice as aforesaid.

          6.5  Entire Agreement.  This Agreement and the schedules and exhibits
               ----------------                                                
hereto (which are incorporated herein by reference) constitute the entire
agreement between the parties hereto pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, relating to the subject matter of this Agreement.  No
supplement, modification, waiver or termination of this Agreement shall be valid
unless executed by the party to be bound thereby.  No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver, unless otherwise expressly provided.

          6.6  Headings. Section and subsection headings are not to be
               --------                                               
considered part of this Agreement and are included solely for convenience and
reference and in no way define, limit or describe the scope of this Agreement or
the intent of any provisions hereof.

          6.7  Successors and Assigns.  All of the terms, provisions and
               ----------------------                                   
obligations of this Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective heirs, representatives, successors
and assigns.

          6.8  Governing Law.  The validity, construction and interpretation of
               -------------                                                   
this Agreement shall be governed in all respects by the laws of the State of
California applicable to contracts made and to be performed wholly within that
State.

          6.9  Counterparts. This Agreement may be executed simultaneously in
               ------------                                                  
two or more counterparts, each one of which shall be deemed an original, but all
of which shall constitute one and the same instrument.

          6.10 Third Parties.  Nothing in this Agreement, expressed or implied,
               -------------                                                   
is intended to confer upon any person other than the parties hereto and their
respective heirs, representatives, successors and assigns any rights or remedies
under or by reason of this Agreement.

                                       10
<PAGE>
 
          6.11 Attorneys' Fees.  In the event any party takes legal action to
               ---------------                                               
enforce any of the terms of this Agreement, the unsuccessful party to such
action shall pay the successful party's expenses (including, but not limited to,
reasonable attorneys' fees and costs) incurred in such action.

          6.12 Further Assurances.  Each party hereto shall, from time to time
               ------------------                                             
at and after the date hereof, execute and deliver such instruments, documents
and assurances and take such further actions as the other parties reasonably may
request to carry out the purpose and intent of this Agreement.

          6.13 Arbitration.  Any controversy arising out of or relating to this
               -----------                                                     
Agreement or the transactions contemplated hereby shall be referred to
arbitration before the American Arbitration Association strictly in accordance
with the terms of this Agreement and the substantive law of the State of
California.  The board of arbitrators shall convene at a place mutually
acceptable to the parties in the State of California and, if the place of
arbitration cannot be agreed upon, arbitration shall be conducted in Los
Angeles.  The parties hereto agree to accept the decision of the board of
arbitrators, and judgment upon any award rendered hereunder may be entered in
any court having jurisdiction thereof.  Neither party shall institute a
proceeding hereunder until that party has furnished to the other party, by
registered mail, at least thirty (30) days prior written notice of its intent to
do so.

          6.14 Construction.  This Agreement was reviewed by legal counsel for
               ------------                                                   
each party hereto and is the product of informed negotiations between the
parties hereto.  If any part of this Agreement is deemed to be unclear or
ambiguous, it shall be construed as if it were drafted jointly by the parties.
Each party hereto acknowledges that no party was in a superior bargaining
position regarding the substantive terms of this Agreement.

          6.15 Consent to Jurisdiction.  Subject to Section 6.13, each party
               -----------------------                                      
hereto, to the fullest extent it may effectively do so under applicable law,
irrevocably (i) submits to the exclusive jurisdiction of any court of the State
of California or the United States of America sitting in the City of Los Angeles
over any suit, action or proceeding arising out of or relating to this
Agreement, (ii) waives and agrees not to assert, by way of motion, as a defense
or otherwise, any claim that it is not subject to the jurisdiction of any such
court, any objection that it may now or hereafter have to the establishment of
the venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum, (iii) agrees that a judgment in any such
suit, action or proceeding brought in any such court shall be conclusive and
binding upon such party and may be enforced in the courts of the United States
of America, the State of California or the Republic of Mexico (or any other
courts to the jurisdiction of which such party is or may be subject) by a suit
upon such judgment and (iv) consents to process being served in any such suit,
action or proceeding by mailing a copy thereof by United States mail, registered
or certified, postage prepaid, return receipt requested, to CT Corporation at
818 West Seventh Street, Los Angeles, California  90017 (and each party hereby
irrevocably appoints CT Corporation as its lawful agent to accept such service
of process on behalf of such party). Each party agrees that such service (i)
shall be deemed in every respect effective service of process upon such party in
any such suit, action or proceeding and (ii) shall, to the fullest extent
permitted by law, be taken and held to be valid personal service upon and
personal delivery to such party.

          6.16 Expenses.  Each party shall bear the expenses incurred by it in
               --------                                                       
connection with the negotiation, execution and delivery of this Agreement and
the other agreements and instruments contemplated hereby and the consummation of
the transactions contemplated hereby and thereby.

          6.17 Severable Provisions.  The provisions of this Agreement are
               --------------------                                       
severable, and if any one or more provisions may be determined to be illegal or
otherwise unenforceable, in whole or in part, the remaining provisions, and any
partially unenforceable provisions to the extent enforceable, shall nevertheless
be binding and enforceable.

          6.18 Taxes.  The Sellers shall pay timely any transfer, sales or other
               -----                                                            
taxes which may become due or payable by virtue of the transactions contemplated
by this Agreement, other than the 2% transfer tax payable on the value of land
and building and the 15% value added tax payable on the purchase price of the
Assets other than land.

                                       11
<PAGE>
 
          IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first set forth above.


          Purchaser:          TARRANT MEXICO, S. de R.L. de C.V.


                              By           /s/ Gerard Guez
                                    ------------------------------------
                                    Authorized Representative
                                    3151 East Washington Boulevard
                                    Los Angeles, California  90023
                                    Telecopier:  (213) 881-0368


          Sellers:            INMOBILIARIA CUADROS, S.A. de C.V.



                              By        /s/ Kamel Nacif
                                    ------------------------------------
                                    Authorized Representative
                                    Edgar Allen Poe #231
                                    Col. Polanco, C.P. 11550
                                    Mexico, D.F.
                                    Telecopier: (525) 255-1009


                              JAMIL TEXTIL, S.A. de C.V.



                              By        /s/ Kamel Nacif
                                    ------------------------------------
                                    Authorized Representative
                                    Edgar Allen Poe #231
                                    Col. Polanco, C.P. 11550
                                    Mexico, D.F.
                                    Telecopier: (525) 255-1009



          Shareholders:                 /s/ Kamel Nacif
                              ------------------------------------------
                              KAMEL NACIF
                              Edgar Allen Poe #231
                              Col. Polanco, C.P. 11550
                              Mexico, D.F.
                              Telecopier: (525) 255-1009



                                        /s/ Irma Benavides Montes de Oca
                              ------------------------------------------
                              IRMA BENAVIDES MONTES DE OCA
                              Edgar Allen Poe #231
                              Col. Polanco, C.P. 11550
                              Mexico, D.F.
                              Telecopier: (525) 255-1009

                                       12
<PAGE>
 
                 SCHEDULES AND EXHIBITS INTENTIONALLY OMITTED.

                                       13