You can move directly to LK 5.0, convert the process and convert the DB.
There are some special things to keep in mind and are covered in the Dev Zone article "Converting Lookout 3.8 Processes to Lookout 4.5." Follow these guide lines but this will take some time depending on the size of the process. If you only have LK 3.8 programming experience, spend the time reading the Help files because there are massive advancements in the programming environment. You will save time by reading them first, rather than later after hours of work.
LK 3.8 DB's are not compatible with LK 4.x DB's. Lookout 5.0 came out with Historical Data Viewer to view your DB's and has the ability to convert a 3.8 to the new format. Follow KB article "Using the Citadel Database with Lookout
5."
Converting Lookout 3.8 Processes to Lookout 4.5