open (INFILE, "input.txt")
  or die "Can't open input.txt: $!\n";
open (OUTFILE, ">output.txt")
  or die "Can't open output.txt: $!\n";

while (<INFILE>) {
  s/foo/bar/g;
  print OUTFILE;
}
[download]

I removed the /m and /s options from your s/// operator as they have no effect on data that doesn't contain newlines.

--
<http://www.dave.org.uk>

"The first rule of Perl club is you do not talk about Perl club."
-- Chip Salzenberg