Error "proxy address already being used please choose another proxy address" seen but the account is still merged.
This can be caused if the contact and the user account both have the same proxy address on them when attempting to merge.
Remove the proxy on the User Security Object in AD and retry the merge.
Steps: Follow the steps shown in Microsoft Knowledge Base Article 318774, titled "Removing duplicate and unwanted proxy addresses in Exchange" https://support.microsoft.com/en-us/kb/318774
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