In one of the kickstarter videos a sheep was killed (it kind of looked like it exploded because the death animations were not done for many NPCs/creatures) and it was mentioned that sheep should have a faction, so they would react to the characters if they saw them killing other sheep nearby. Later in the comments someone mentioned armour should be added for sheep, and an image was posted from the comedy / horror movie
Black Sheep, which lead to more evil sheep pictures and then weresheep.