Hello,

I think your understanding is correct. From this old technote:
http://www.sybase.com/detail?id=20269

WARNING!
Sybase recommends you restrict access of this file only to system
administrators because it contains passwords.

Using a script

1. Create a script, loginscript.txt, of user logins and passwords.
For
example:

sp_addlogin "loginame1", "password1"
go
sp_addlogin "loginame2", "password2"
go

2. Log into the new server and run the login script. For example:

isql -Usa -P -i loginscript.txt

Note: This script resets passwords to the original password. Remember
to
alert users that their passwords were reset.