#<s>Bash 74</s> Sed 65 + 4 bytes

65 bytes for the script and 4 for the `r` and `f` flags.

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

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