GD2 overlaying image with rounded (transparent) corners

After a few hours of testing & failing, I'm at a blank and need some help.

I have a script which uses GD to resize a series of images. Next to that it must overlay a small image in the bottom right corner, a watermark.

The problem is that the image I need to overlay, has rounded corners (check attachement). Simply overlaying the image will make those transparent parts (space where the corner is rounded) black, while I need it to stay transparent. Using a transparency pct will make the whole image transparent, which I do not need because I only need it to be transparent on the corners.

Could someone please help me because I'm all out of ideas.

 

http://rs.bahneman.com/wm.php.html

An example on doing this.

 

Thanks a lot NatalicWolf.

I was using imagecopymerge, the example you provided used imagecopy. This works just like I need.