Sam, the blacksmith of Thais, used to be an avid explorer. Because of this, he lost his backpack in Ulderek's Rock due to an attack of Orcs. It's believed his backpack was stolen by an Orc. If you find and return it to him, he'll tell his friend Kroox in Kazordoon to give you a gift: a Dwarven Armor.
You can only loot the backpack out of one specific orc inside the Orc Fortress. This Orc is a rare spawn on the north-eastern end, near the Orc Powder tower (here). The backpack is red embroidered with the message "Property of Sam, Thais."
Sam will send you to see Kroox in Kazordoon. After telling Kroox that Sam sent you, he will tell you that the only Dwarven Armor he has left is located deep down in the Dwarf Mines. Now head down to the Pick 'N Shovel Mine, and make your way to the Crusader Helmet Quest location. There is a total of four Giant Spiders in this cave, but you should only encounter three on the way to the Armor. Remember to bring a melee weapon to break through the Spider Webs. Go down a passage leading south, before the Crusader Helmet spot, here. You'll see a quest door with a Chest (Quest) inside. Open the door and get the Dwarven Armor from inside the chest.
Congratulations, you have completed Sam's Old Backpack Quest. Enjoy your new Dwarven Armor.
Note: you can only do this quest once. If you get another Old and Used Backpack from the Orc that drops it, you can use it as a container to carry items in, do the quest on another character, or sell it to another player.