I too would NOT recommend strapping Side Reins on this guy...yet. Get him used to the normal behaviors for lunging (going forward, around you) before introducing collection and any head restriction. I've heard stories of horses "freaking out" with side reins and rearing and flipping themselves over.
Just stay calm yourself, and encourage him forward. If he rears, stop a sec, take a deep breath, and when he returns to earth, encourage him forward again. Remember to stand parallel to his shoulder so you don't block his forward line-of-travel. If you use a lunge whip, keep it pointed towards his rear end. So theres a Triangle with points at Bit, You, and End of Lunge Whip. And wear gloves so you don't get any lunge-line burns!