but when I replace xxx by myStep pState as in

exProcess2 pState loc = LP {lstep = myStep pState}
        where
            xxx = myStep pState
            myStep _ = return $ \(E t l _) ->  ([E (t+1) l Wakeup], (proc' pState))
            proc' state = exProcess2 (trc state) loc

I get

    No instance for (Monad m0) arising from a use of `myStep'
    The type variable `m0' is ambiguous
    Possible fix: add a type signature that fixes these type variable(s)

It compiles again when I remove the xxx = line. Why is that so?