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The second groove in the valve stem is for this "O" ring. You will be able to take a shop rag and wipe off the old rings if they are original. They will fall apart in your hands, which is why you should use a rag.
Forum suggestions have been to use Felpro intake seals for all the valves.
There is a plastic sleeve that should have come with the seals. This fits over the valve stem to protect the seals and "O" rings from being cut up on the valve stem grooves when you install.
The exhaust seals in the kit are ok. The intake seal is a better seal.
I replaced them on my Formula and heard that after i was done.
They are doing fine after 2 years. benny