Foul Larry's a highly competetive gangsta basketball friend. This doesn't make him particularly evil, although he obviously has a mean streak and probably doesn't play fair all the time.
His "change to good?" He's been on the street for years, and now he's getting a chance to fulfill his purpose by having a kid to be his friend again. For an Imaginary Friend, that's like having a religious experience. Dude won't have to sit on the sidewalk for the rest of his life.
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