//Convert alpha to a 0..1 scale

float overlayAlphaFloat = (float)overlayAlpha / 100.0f;

//Copy the destination bitmap

//NOTE: Can't clone here, because if destBmp is indexed instead of just RGB,

//Graphics.FromImage will fail

Bitmap newBmp = new Bitmap(destBmp.Size.Width,
    destBmp.Size.Height);

//Create a graphics object attached to the bitmap

Graphics newBmpGraphics = Graphics.FromImage(newBmp);

//Draw the input bitmap into this new graphics object

newBmpGraphics.DrawImage(destBmp,
    new Rectangle(0, 0,
                destBmp.Size.Width,
                destBmp.Size.Height),
    0, 0, destBmp.Size.Width, destBmp.Size.Height,
    GraphicsUnit.Pixel);

//Create a new bitmap object the same size as the overlay bitmap

Bitmap overlayBmp = new Bitmap(bmpToOverlay.Size.Width, 
                                bmpToOverlay.Size.Height);

//Make overlayBmp transparent

overlayBmp.MakeTransparent(overlayBmp.GetPixel(0,0));

//Create a graphics object attached to the bitmap

Graphics overlayBmpGraphics = Graphics.FromImage(overlayBmp);