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#Bash 74 bytes

sed -r "s/\s*([.,?\!\"\':;\(\)A-Z])(\1|\s)*/\1/g;s/(he|she|it) is/\1\'s/i"

Usage: Enter text, press enter and then Ctrl + D (send EOF).

This should be straight up sed, but I can't get it to work properly... (Unknown command `.')