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I guess we'll never know what happened and a lot of good explanations have been offered in this thread: the Peter Principle, Health, Just a bad coach, etc.
My own guess (and that's all it is) is that Belichick decided to look for someone else as his DC, but has a lot of respect for Pees and so offered him the "out" of resigning as long as he didn't commit the Mangini Sin of going to a team in the Division. He probably also had nice things to say about him for a job other than overall Defensive Coordinator.
My own guess (and that's all it is) is that Belichick decided to look for someone else as his DC, but has a lot of respect for Pees and so offered him the "out" of resigning as long as he didn't commit the Mangini Sin of going to a team in the Division. He probably also had nice things to say about him for a job other than overall Defensive Coordinator.