B. he
The word 'he' is being modified by the participial phrase.
The word 'laughing' is the participle.
A PARTICIPLE is a verbal that is used as an adjective and most often ends in -ing or -ed. They express an action or a state of being. However, since they function as adjectives, participles modify nouns or pronouns.
A PARTICIPIAL PHRASE is a group of words consisting of a participle and the modifier(s) and/or (pro)noun(s) or noun phrase(s) that function as the direct object(s), indirect object(s), or complement(s) of the action or state expressed in the participle.
