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 it, he'll tell his friend Kroox in Kazordoon to give you a gift: a Dwarven Armor.
You can loot the backpack out of one 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. Now head to the Crusader Helmet Quest location. There is a total of five Giant Spiders in this cave. Go down a passage leading south, before the Crusader Helmet spot, here. You'll see a quest door with a Chest inside. Open the door and get the Dwarven Armor from inside the chest.
Note: you can only do this quest once. If you get another Old and Used Backpack from the orc that drops it, you may use it as a Container to carry Items, do the quest on another character, or sell it to another player.
Congratulations, you have completed Sam's Old Backpack Quest. Enjoy your new Dwarven Armor.