SC 13D/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D/A

Under the Securities Exchange Act of 1934

(Amendment No. 5)*

RAE Systems Inc.

(Name of Issuer)

Common Stock

(Title of Class of Securities)

75061P 10 2

(CUSIP Number)

Robert I. Chen	Robert T. Ishii
c/o RAE Systems, Inc.	Wilson Sonsini Goodrich & Rosati,
3775 North First Street	Professional Corporation
San Jose, California 95134	One Market Street, Spear Tower Suite 3300
	San Francisco, California 94105
(408) 952-8200	(650) 947-2000

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

May 17, 2011

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box.  ¨

Note:  Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

1	NAMES OF REPORTING PERSONS:             Robert I. Chen
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS): (a)  ¨ (b)  x
3	SEC USE ONLY:
4	SOURCE OF FUNDS (SEE INSTRUCTIONS):             OO
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e):              ¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION:             United States of America

NUMBER OF   SHARES   BENEFICIALLY   OWNED BY   EACH   REPORTING   PERSON   WITH	7    SOLE VOTING POWER:                  0
	8    SHARED VOTING POWER:                  15,834,942
	9    SOLE DISPOSITIVE POWER:                  270,833
	10    SHARED DISPOSITIVE POWER:                  15,564,109

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:              15,834,942*
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):              x             (See Item 6)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):              26.6%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):             OO

* Includes options to purchase 270,833 shares of common stock of issuer exercisable within 60 days.

2

1	NAMES OF REPORTING PERSONS:             Lien Q. Chen
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS): (a)  ¨ (b)  x
3	SEC USE ONLY:
4	SOURCE OF FUNDS (SEE INSTRUCTIONS):             OO
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e):              ¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION:             United States of America

NUMBER OF   SHARES   BENEFICIALLY   OWNED BY   EACH   REPORTING   PERSON   WITH	7    SOLE VOTING POWER:                 0
	8    SHARED VOTING POWER:                 15,564,109
	9    SOLE DISPOSITIVE POWER:                 0
	10    SHARED DISPOSITIVE POWER:                 15,564,109

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:             15,564,109
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):              x             (See Item 6)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):              26.2%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):             OO

3

1	NAMES OF REPORTING PERSONS:             Chen Revocable Trust DTD 5/8/2001
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS): (a)  ¨ (b)  x
3	SEC USE ONLY:
4	SOURCE OF FUNDS (SEE INSTRUCTIONS):             OO
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e):              ¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION:             California

NUMBER OF   SHARES   BENEFICIALLY   OWNED BY   EACH   REPORTING   PERSON   WITH	7    SOLE VOTING POWER:                 0
	8    SHARED VOTING POWER:                  15,382,849
	9    SOLE DISPOSITIVE POWER:                 0
	10    SHARED DISPOSITIVE POWER:                  15,382,849

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):              x             (See Item 6)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):              25.8%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):             OO

4

1	NAMES OF REPORTING PERSONS:             Chen Family Foundation
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS): (a)  ¨ (b)  x
3	SEC USE ONLY:
4	SOURCE OF FUNDS (SEE INSTRUCTIONS):             OO
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e):              ¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION:             California

NUMBER OF   SHARES   BENEFICIALLY   OWNED BY   EACH   REPORTING   PERSON   WITH	7    SOLE VOTING POWER:                  0
	8    SHARED VOTING POWER:                  181,260
	9    SOLE DISPOSITIVE POWER:                 0
	10    SHARED DISPOSITIVE POWER:                 181,260

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:             181,260
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):              x             (See Item 6)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):              0.3%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):             OO

5

1	NAMES OF REPORTING PERSONS:             Peter Hsi
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS): (a)  ¨ (b)  x
3	SEC USE ONLY:
4	SOURCE OF FUNDS (SEE INSTRUCTIONS):             OO
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e):              ¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION:             United States of America

NUMBER OF   SHARES   BENEFICIALLY   OWNED BY   EACH   REPORTING   PERSON   WITH	7    SOLE VOTING POWER:                 0
	8    SHARED VOTING POWER:                 2,757,998
	9    SOLE DISPOSITIVE POWER:                 66,666
	10    SHARED DISPOSITIVE POWER:                 2,691,332

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:             2,757,998*
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):              x             (See Item 6)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):             4.6%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):             OO

* Includes options to purchase 66,666 shares of common stock of issuer exercisable within 60 days.

6

1	NAMES OF REPORTING PERSONS:             Sandy Hsi
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS): (a)  ¨ (b)  x
3	SEC USE ONLY:
4	SOURCE OF FUNDS (SEE INSTRUCTIONS):             OO
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e):              ¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION:             United States of America

NUMBER OF   SHARES   BENEFICIALLY   OWNED BY   EACH   REPORTING   PERSON   WITH	7    SOLE VOTING POWER:                  0
	8    SHARED VOTING POWER:                 2,691,332
	9    SOLE DISPOSITIVE POWER:                 0
	10    SHARED DISPOSITIVE POWER:                 2,691,332

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:             2,691,332
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):              x             (See Item 6)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):             4.5%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):             OO

7

1	NAMES OF REPORTING PERSONS:             Hsi Family Trust
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS): (a)  ¨ (b)  x
3	SEC USE ONLY:
4	SOURCE OF FUNDS (SEE INSTRUCTIONS):             OO
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e):              ¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION:             California

NUMBER OF   SHARES   BENEFICIALLY   OWNED BY   EACH   REPORTING   PERSON   WITH	7    SOLE VOTING POWER:                  0
	8    SHARED VOTING POWER:                 2,691,332
	9    SOLE DISPOSITIVE POWER:                 0
	10    SHARED DISPOSITIVE POWER:                 2,691,332

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:             2,691,332
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):              x             (See Item 6)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):              4.5%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):             OO

8

This Amendment No. 5 (this “Amendment No. 5”) to the statement on Schedule 13D, filed with the Securities and Exchange Commission on behalf of the Reporting Persons relating to the Common Stock of RAE Systems, Inc., a Delaware corporation (“RAE”), on September 29, 2010, as amended and restated (the “Schedule 13D”) is being filed pursuant to Rule 13d-2 of the Securities Exchange Act, as amended, on behalf of the Reporting Persons to amend certain information set forth below to the items indicated. Unless otherwise stated herein, all capitalized terms used in this Amendment No. 5 shall have the same meaning as those set forth in the Schedule 13D.

Item 4. Purpose of Transaction.

Item 4 of the Schedule 13D is hereby amended and supplemented by adding the following:

On May 17, 2011, Purchaser, Merger Sub and RAE entered into Amendment No. 2 to the Merger Agreement (“Amendment No. 2 to the Merger Agreement”), which was previously amended by Amendment No. 1 dated April 3, 2011 (“Amendment No. 1 to the Merger Agreement”), pursuant to which, among other things, the Merger Consideration was increased to $2.00 per share, payable in cash, without interest. Purchaser and Merger Sub are each affiliates of Vector Capital IV, L.P., Vector Entrepreneur Fund III, L.P. and Vector Capital III, L.P. (together, “Vector”)

Concurrently with the execution of Amendment No. 2 to the Merger Agreement, Robert I. Chen and Peter Hsi (each, a “Voting Party” and collectively, the “Voting Parties”) entered into consents and agreements with Purchaser (collectively, the “Consents and Agreements”), pursuant to which, among other things, the Voting Parties and Purchaser agreed to terminate the Voting Agreements.

Concurrently with the execution of Amendment No. 2 to the Merger Agreement, the Chen Revolcable Trust DTD 5/8/2001 (the “RLC Trust”) entered into Amendment No. 1 to its Rollover Agreement (“Amendment No. 1 to the RLC Rollover Agreement”) with Purchaser which has the effect that, with the Merger Consideration equal to $2.00 per share, the RLC Trust is contributing approximately 585,166 additional shares (worth approximately $1.2 million at $2.00 per share) to Purchaser for no consideration. To the extent that the Merger Consideration increases after the date hereof, the RLC Trust will contribute an additional amount of shares to Purchaser for no consideration. The number of shares to be contributed for no consideration is equal to (a) (x) (A) the Merger Consideration minus (B) $1.75 times (y) (A) the number of shares of RAE common stock owned by the RLC Trust on the closing date of the Merger minus (B) 10,701,525 divided by (b) the Merger Consideration.

References to, and descriptions of the Consents and Agreements and Amendment No. 1 to the RLC Rollover Agreement throughout this statement are qualified in their entirety by reference to the Form of Consent and Agreement included as Exhibit 10.2 to RAE’s current report on Form 8-K filed May 18, 2011, and Amendment No. 1 to the RLC Rollover Agreement included as Exhibit 5 hereto, respectively, and which are incorporated herein by reference.

9

Item 5. Interest in Securities of the Issuer.

Item 5 of the Schedule 13D is hereby amended as follows:

1. Section (a)(iv) is amended and restated in its entirety to read as follows:

“(iv) Robert I. Chen is the beneficial owner of 270,833 shares of Common Stock that are subject to options held by him that are exercisable within 60 days of the date of this statement, representing 0.5% of all of the outstanding shares of Common Stock.”

2. Section (a)(vii) is amended and restated in its entirety to read as follows:

“(vii) Peter Hsi is the beneficial owner of 66,666 shares of Common Stock that are subject to options held by him that are exercisable within 60 days of the date of this statement, representing 0.1% of all of the outstanding shares of Common Stock.”

3. Section (b)(iii) is amended and restated in its entirety to read as follows:

“(iii) Robert I. Chen has the sole power to dispose or direct the disposition of 270,833 shares of Common Stock that are subject to options held by him that are exercisable within 60 days of the date of this statement.”

4. Section (b)(v) is amended and restated in its entirety to read as follows:

“(v) Peter Hsi has the sole power to dispose or direct the disposition of 66,666 shares of Common Stock that are subject to options held by him that are exercisable within 60 days of the date of this statement.”

Item 7. Materials to be Filed as Exhibits.

Item 7 of the Schedule 13D is hereby amended to add the following exhibits:

4	Form of Consent and Agreement, by and between RAE and each of Robert Chen and Peter Hsi, respectively, dated as of May 17, 2011 (Incorporated by reference to the Current Report on Form 8-K filed by RAE on May 18, 2011)
5	Amendment No. 1 to Rollover Agreement, dated as of January 18, 2011, by and between RAE and RLC Trust

10

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: May 20, 2011
CHEN REVOCABLE TRUST DTD 5/8/2001		CHEN FAMILY FOUNDATION
By:	/S/    ROBERT I. CHEN	By:	/S/    ROBERT I. CHEN
	Robert I. Chen		Robert I. Chen
	Trustee
By:	/S/    LIEN Q. CHEN	By:	/S/    LIEN Q. CHEN
	Lien Q. Chen		Lien Q. Chen
	Trustee
ROBERT I. CHEN		LIEN Q. CHEN
By:	/S/    ROBERT I. CHEN	By:	/S/    LIEN Q. CHEN
HSI FAMILY TRUST		PETER HSI
By:	/S/    PETER HSI	By:	/S/    PETER HSI
	Peter Hsi
	Trustee
		SANDY HSI
By:	/S/    SANDY HSI	By:	/S/    SANDY HSI
	Sandy Hsi
	Trustee

11

EXHIBIT INDEX

Exhibit No.	Title
4	Form of Consent and Agreement, by and between RAE and each of Robert Chen and Peter Hsi, respectively, dated as of May 17, 2011 (Incorporated by reference to the Current Report on Form 8-K filed by RAE on May 18, 2011)
5	Amendment No. 1 to Rollover Agreement, dated as of January 18, 2011, by and between RAE and RLC Trust

EX-5

Exhibit 5

AMENDMENT NO. 1 TO ROLLOVER AGREEMENT

This Amendment No. 1 (this “Amendment No. 1”) to that certain Rollover Agreement, dated as of January 18, 2011 (the “Rollover Agreement”), by and between RAY HOLDING CORPORATION, a Delaware corporation (the “Company”) and CHEN REVOCABLE TRUST DTD 5/8/2011 (the “Investor”), is made and entered into as of May 17, 2011 by and between the Company and the Investor. All capitalized terms that are used in this Amendment No. 1 but not defined in this Amendment No. 1 shall have the respective meanings ascribed thereto in the Rollover Agreement.

A. On May 17, 2011, Parent, Merger Sub and the Company entered into Amendment No. 2 to the Merger Agreement (“Amendment No. 2 to the Merger Agreement”).

B. In connection with Amendment No. 2 to the Merger Agreement, the Investor and the Company desire to enter into this Amendment No. 1, and the Investor believes it is in its best interests to enter into this Amendment No. 1 and consummate the transactions contemplated hereby, by the Rollover Agreement and by the Merger Agreement.

NOW, THEREFORE, the parties hereto hereby agree as follows:

1. Rollover Amount.

(a) Recital C of the Rollover Agreement is hereby amended and restated in its entirety as set forth below:

C. In connection with the transactions contemplated by the Merger Agreement (the “Contemplated Transactions”), the Investor desires, immediately prior to the consummation of the Merger on the Closing Date, to contribute to the Company (i) that number of shares of Target Common Stock as set forth on Exhibit A attached hereto (the “Exchange Shares”) having a per share purchase price equal to the Merger Consideration (the aggregate purchase price for the shares of Target Common Stock to be exchanged by the Investor shall be referred to herein as the “Rollover Amount”) and (ii) the Transferable Shares.

(b) Section 1(a) of the Rollover Agreement is hereby amended and restated in its entirety as set forth below:

(a) Immediately prior to the Effective Time (as such term is defined in the Merger Agreement), the Investor shall surrender to the Company the Investor’s Exchange Shares and the Transferable Shares (and the certificate(s) representing such Exchange Shares and such Transferable Shares accompanied by duly executed stock powers), free and clear of all Encumbrances and, simultaneously with such surrender, the Company shall issue to the Investor a certain number of shares of the Company’s Preferred Stock and Common Stock (as further defined in Section 7(f), the “Rollover Shares”) (the “Rollover”). Such Rollover Shares issued to the Investor shall have an aggregate value equal to the Rollover Amount. The allocations of shares of Preferred Stock and Common

Stock will be in accordance with the Investor’s, the other Rollover Holders’ and the Sponsors’ pro rata portion set forth on Exhibit F, and for the avoidance of doubt, with respect to the Investor, shall be the same relative proportion as the allocation of the shares of Preferred Stock and Common Stock issued to the Sponsors pursuant to the Subscription Agreement. Immediately following the Effective Time, there shall not be outstanding any stock of the Company or securities convertible or exchangeable for any shares of the Company’s capital stock other than the Preferred Stock and Common Stock issued to the Investor, the other Rollover Holders and the Sponsors. For purposes of illustration only, Exhibit F sets forth an example of the capitalization table based on the assumed total outstanding equity required to be funded to Parent at Closing.

2. Fees and Expenses. Section 9(n) of the Rollover Agreement is hereby amended and restated in its entirety as set forth below:

(n) Fees and Expenses. (i) Subject to Section 9(n)(ii), the Expenses incurred by each party hereto will be borne by the party incurring such Expenses. (ii) The Company shall reimburse the Investor and the other Rollover Holders for their reasonable out-of-pocket Expenses (or directly pay such Expenses to the extent not paid by the Investor as of the Effective Time), up to a maximum of $400,000 in the aggregate for the Investor and all of the other Rollover Holders; provided, if the Investor and the other Rollover Holders provide reasonable advance notice to the Company that they have incurred Expenses in excess of $400,000, the Company may consent to the payment of such additional Expenses, which consent will not be unreasonably withheld; provided, further, that the Company shall have no obligation under this Section 9(n)(ii) to the Investor in the event the Rollover is not effected. (iii) For purposes of this Agreement, “Expenses” shall mean, with respect to a party, the reasonable fees and expenses incurred by that party in connection with the authorization, preparation, negotiation, execution and performance of this Agreement, the Transaction Documents, any related agreements and transactions contemplated hereby and thereby (including the fees and expenses of counsel, accountants, investment bankers, financial sources and consultants). The Investor shall cause any third party for whom it will seek reimbursement of Expenses hereunder to provide the Company, promptly upon request, such updates and related information related to the Expenses incurred (including billing accruals) as the Company may reasonably request. Nothing in this Agreement limits in any manner the rights of the Investor or its Affiliates to indemnification pursuant to any instrument, document or applicable law.

3. Rollover Agreement References. The parties hereto hereby agree that all references to the “Agreement” set forth in the Rollover Agreement (including, without limitation, in the representations and warranties of the parties set forth therein) shall be deemed to be references to the Rollover Agreement as amended by this Amendment No. 1.

4. Full Force and Effect. Except as expressly amended or modified hereby, the Rollover Agreement and the agreements, documents, instruments and certificates among the parties hereto as contemplated by, or referred to, in the Rollover Agreement shall remain in full force and effect without any amendment or other modification thereto.

5. Counterparts. This Amendment No. 1 may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. The exchange of a fully executed Amendment No. 1 (in counterparts or otherwise) by facsimile shall be sufficient to bind the parties to the terms and conditions of this Amendment No. 1.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as of the date first written above.

RAY HOLDING CORPORATION
By:	/s/ David Baylor
	Name:  David Baylor
	Title:    President
INVESTOR:
/s/ Robert I. Chen
/s/ Lien Chen

Amendment No. 1 Signature Page