SQLNet.ORA and Connect Internal

We’re running Oracle 8.1.5 on HP-UX 10.20. In order to change the location Oracle was writing it’s log and trace files to we created a SQLNet.ORA file with the necessary parameters. The next time we tried to start SVRMGRL and “connect internal” svrmgr would ask for a password. After we removed the SQLNet.ORA, we were no longer asked for the password. Why is svrmgr doing this? Is there a way to have the sqlnet.ora file and not be asked for a password?