OTV Not working--(simple INE topology)

Gents,

I tried a simple INE topology for OTV

Server1----5k1---7K1(OTV)----------7K2(OTV)----5K2---Server2

I can't bring-up OTV even with a very simple config.
Reason :- Site Vlan down ( Local device is not AED-Capable (Site-VLAN is
Down))

I can't understand this behavior as AED is somehow required on a dual edge
set-up. Please advice what's that I'm doing wrong. Following are the
configs and some show command outputs.

--
--Larry
------------LOGS-----------------
sh run otv
!Command: show running-config otv
!Time: Mon Apr 14 09:46:44 2014
version 6.2(2)
feature otv
otv site-vlan 888
interface Overlay1
  otv join-interface Ethernet1/1
  otv control-group 224.1.1.1
  otv data-group 232.1.1.0/24
  otv extend-vlan 20
  no shutdown
otv site-identifier 0x101
N7K1#
N7K1# sh run int e1/1
!Command: show running-config interface Ethernet1/1
!Time: Mon Apr 14 09:48:09 2014
version 6.2(2)
interface Ethernet1/1
  mtu 9100
  ip address 169.254.0.71/24
  ip igmp version 3
  no shutdown
N7K1#
N7K1#
N7K1#
N7K1#
N7K1# sh otv adja Overlay Adjacency database
Overlay-Interface Overlay1  :
Hostname                         System-ID      Dest Addr       Up Time
State
N7K2                             0026.980c.2143 169.254.0.72    00:04:47
UP
N7K1#
N7K1# sh otv site
Dual Adjacency State Description
    Full     - Both site and overlay adjacency up
    Partial  - Either site/overlay adjacency down
    Down     - Both adjacencies are down (Neighbor is down/unreachable)
    (!)      - Site-ID mismatch detected
Local Edge Device Information:
    Hostname N7K1
    System-ID 68bd.abd7.6044
    Site-Identifier 0000.0000.0101
    Site-VLAN 888 State is Down
Site Information for Overlay1:
Local device is not AED-Capable (Site-VLAN is Down)
Neighbor Edge Devices in Site: 0
Hostname                 System-ID        Adjacency-       Adjacency-
AED-
                                          State            Uptime
Capable
-----------------------------------------------------------------------------
---
--More--

N7K1#
N7K1#
N7K1#
=============================================================================
==
sh run otv
!Command: show running-config otv
!Time: Mon Apr 14 09:43:54 2014
version 6.2(2)
feature otv
otv site-vlan 888
interface Overlay1
  otv join-interface Ethernet1/1
  otv control-group 224.1.1.1
  otv data-group 232.1.1.0/24
  otv extend-vlan 20
  no shutdown
otv site-identifier 0x102
N7K2#
N7K2# sh otv adj Overlay Adjacency database
Overlay-Interface Overlay1  :
Hostname                         System-ID      Dest Addr       Up Time
State
N7K1                             68bd.abd7.6044 169.254.0.71    00:05:34
UP
N7K2#
N7K2# sh int e1/1
!Command: show running-config interface Ethernet1/1
!Time: Mon Apr 14 09:44:20 2014
version 6.2(2)
interface Ethernet1/1
  mtu 9100
  ip address 169.254.0.72/24
  ip igmp version 3
  no shutdown
N7K2#
N7K2# sh otv site
Dual Adjacency State Description
    Full     - Both site and overlay adjacency up
    Partial  - Either site/overlay adjacency down
    Down     - Both adjacencies are down (Neighbor is down/unreachable)
    (!)      - Site-ID mismatch detected
Local Edge Device Information:
    Hostname N7K2
    System-ID 0026.980c.2143
    Site-Identifier 0000.0000.0102
    Site-VLAN 888 State is Down
Site Information for Overlay1:
Local device is not AED-Capable (Site-VLAN is Down)
Neighbor Edge Devices in Site: 0
Hostname                 System-ID        Adjacency-       Adjacency-
AED-
                                          State            Uptime
Capable
-----------------------------------------------------------------------------
---
--More--

N7K2#
N7K2#
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