Select the Java classpath to be used when instantiating and invoking the Java class. The classpath includes not only the JAR (or local "src" workspace directory) that contains the class being invoked, but also any JARs that contain classes referenced directly or indirectly by that class.
Note that the Inherit server classloader checkbox is selected by default. If you disable this option, you will only have access to the JARs on your classpath, not the JARs that are deployed to the server. You can also select Parent classloader last when inheriting Process Server classloader.