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2.
With your merged object selected, on the Main Menu Bar, click on Effect
> Warping. In
the Warping dialog window select a Medium Grid size.
I moved the Control Points in a clockwise manner.
One thing to note is if, after moving the Control Points,
you switch the Grid from Medium to another size you will
loose the shifts you have already made.
It is also a good idea to not commit the warp until you have made
your final adjustments. This is what my background object looks like (it
may change before I’m finished):
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