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Html div width 100% not functioning

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There are some problems with my HTML, so I am posting the code.

The first tag is a div with id="header". I have given it 100% width and given it a background image.

Inside the header there's another div with id="header-contents". I want it centered on the page so I have given it a width and then margin:0 auto. It works fine with the max-sized browser but when I zoom in or resize the browser width to about half, the background of the header div starts to disappear at some point and does not fill in 100% width.

This is how it looks at first (and should always look): intended look

This is how it looks when I zoom or resize the browser: after resize

What is the proper HTML and CSS for it? Here's the code:

<!DOCTYPE HTML>
<html>
<style>
body
{
    margin:0;
    padding:0;
}
.clear
{
    display:block;
    clear:both;
}
#header
{
    min-height:156px;
    width:100%;
    background-image:url('http://www.webdesignideas.org/images/bellevueBg.gif');
}
#head-contents
{
    width:974px;
    margin:0 auto;
    height:156px;
}
#header ul
{
    margin:85px 23px 0 0;
    float:right;
    list-style-type:none;
}
#header ul li 
{
    display:inline;
}
#header ul li a 
{
    margin-left:46px;
    font-size:19px;
    color:#fff;
    text-decoration:none;
}
#header ul li a:hover ,
#header ul li a.active 
{
    color:#FD7600
}
</style>
<body>
<div id="header">

<div id="head-contents">

<img src="http://t1.gstatic.com/images?q=tbn:ANd9GcRRlklPBeTiVsV7dycvDxqFyrU02d0grYf4rTUqL-2ZzGb8Qvbwimb37HgO" />

<ul>
<li><a href="#" class="active">Home</a></li>
<li><a href="#">Products</a></li>
<li><a href="#">About</a></li>
<li><a href="#">Contact</a></li>
</ul>

<div class="clear"></div>

</div>

</div>

</body>

</html>