var overlaidImage = Image.FromFile(PATH_TO_WATERMARK);

using (var imageFactory = new ImageFactory(preserveExifData: true))
{
    var factory = imageFactory.Load(IMAGE_STREAM_TO_ALTER);

    using (var outStream = new MemoryStream())
    {
        factory.Overlay(new ImageLayer
        {
            Image = overlaidImage,
            Size = new Size(imageFactory.Image.Width, imageFactory.Image.Height)
        });

        overlaidImage.Dispose();

        var mediaType = id.GetMediaType();

        if (mediaType == Constants.MediaType.Png)
        {
            factory.Format(new PngFormat())
             .Save(outStream);
        }
        else if (mediaType == Constants.MediaType.Gif)
        {
            factory.Format(new GifFormat())
             .Save(outStream);
        }
        else
        {
            factory.Format(new JpegFormat { Quality = 100 })
             .Save(outStream);
        }

        //do something with your outStream
    }
}