Applying to PhD programs - One reference just quit his job I am applying directly to several Professors for a PhD. As part of my applications I usually attach a CV, two references (one is a professor, the other is a research project leader in industry), and if asked I add a note transcript too.

My second referee just told me he quit his job as project leader. As contact info I had attached his work phone and address. Obviously, he will no longer be reachable at those.

What makes things worse is the fact that I recently submitted two PhD applications.To professor A: I sent it a month ago, and he recently replied asking me for my note transcripts. Regardless if he is satisfied or not with my academic performance, when he calls/writes my second reference, the fact that he is unreachable would be a red flag. To professor B: I sent the application a week ago, and have not got any response. Same problem applies, he won't be able to reach my second reference. In such case, he would probably not even bother to ask for my transcript.

What would be the correct course of action now?
The first thing you need to do is check if your reference is still willing to act as a reference even though they have changed jobs. In general, they will, but if they have retired or left the field completely maybe they do not want to. Potentially, a reference who works in industry has signed some sort of non-compete agreement or an NDA that does not allow them to write a reference any longer. Once you either get the referee's new contact information, or a new reference, you need to email your potential supervisors.

In the email, you need to tell the potential supervisor what happened. A job change is pretty typical and does not look bad in any way. Having to change referees is a little more problematic, but just explain briefly what happened.