Actress Katherine Heigl is now speaking out about the latest Grey’s controversy in which sources incorrectly reported that she had stopped contract negotiations and was not returning for another season.

“I am embarrassed that this has become a public matter and disappointed that Touchstone felt it necessary to divulge private employment information,” Heigl said in a statement. “I had hoped I would be able to deal with this issue confidentially with my bosses. I dropped out of the renegotiation simply because I wanted to treat myself with the respect I was not getting from them. No matter how unhappy I am about their decision to respond to this publicly, I continue to be passionate about and committed to this character.”

Following previous reports to the contrary, ABC has issued a statement on Wednesday to Grey’s Anatomy fans, assuring them that Heigl was NOT leaving the show and that she was indeed being rewarded for all her hard work.

“Katherine is an integral part of Grey’s Anatomy and its success. Fortunately, we have a long-term contract to ensure she’ll be with the show for several years to come. In recognition of her tremendous talent and value to the show, we recently approached Katherine with an offer to raise her compensation significantly above the terms of her current contract. We were surprised to see this gesture reported negatively in the press, and want to reassure fans that she will continue as Izzie Stevens.”

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Earlier today People released a story regarding our beloved Izzie Stevens, which alleges that “Katherine Heigl has dropped out of contract talks with Grey’s Anatomy over salary” and that she is “disappointed that (producer) Touchstone doesn’t value her as much as her other costars, especially Sandra Oh and Isaiah Washington.”

Well, I am happy to report to you that Katherine Heigl is not leaving Grey’s Anatomy. At least, not anytime soon. I’ve just spoken with various sources connected to the show, and they all confirm to me that Katherine is under a six-year contract—so legally, she does not have the option of leaving the show.

So, what happened? Well, according to sources and an official release from ABC Television, the network offered to bump Heigl’s pay to a higher amount than her initial contract. However, according to one well-placed show insider, “Heigl’s representation felt it unfair that she was still not being offered the same compensation as some of the other supporting actors are making. And so, obviously, someone leaked the story to People.”

Meanwhile, ABC Television just responded by releasing the following statement:

“Katherine is an integral part of Grey’s Anatomy and its success. Fortunately, we have a long-term contract to ensure she’ll be with the show for several years to come. In recognition of her tremendous talent and value to the show, we recently approached Katherine with an offer to raise her compensation significantly above the terms of her current contract. We were surprised to see this gesture reported negatively in the press, and want to reassure fans that she will continue as Izzie Stevens.”

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Katherine Heigl has dropped out of contract talks with Grey’s Anatomy over salary, a well-placed source tells PEOPLE.

“Katie is disappointed and hurt that (producer) Touchstone doesn’t value her as much as her other costars, especially Sandra Oh and Isaiah Washington,” the source says.

Heigl plays Dr. Isobel “Izzie” Stevenson on the ABC hit medical drama.

A rep for ABC Touchstone TV had no comment.

Plot Summary: On the heels of 2005’s blockbuster “The 40-Year-Old Virgin,” writer/director Judd Apatow again mines hilarity from the relatably human in a comedy about a one-night stand with unexpected consequences: “Knocked Up.” Katherine Heigl (”Grey’s Anatomy,” “Roswell”) joins Virgin alums Seth Rogen, Paul Rudd and Leslie Mann for a comic look about the best thing that will ever ruin your best-laid plans: parenthood.

Allison Scott (Heigl) is an up-and-coming entertainment journalist whose 24-year-old life is on the fast track. But it gets seriously derailed when a drunken one-nighter with slacker Ben Stone (Rogen) results in an unwanted pregnancy. Faced with the prospect of going it alone or getting to know the baby’s father, Allison decides to give the lovable doof a chance.

An overgrown kid who has no desire to settle down, Ben learns that he has a big decision to make with his kid’s mom-to-be: will he hit the road or stay in the picture? Courting a woman you’ve just “Knocked Up,” however, proves to be a little difficult when the two try their hands at dating. As they discover more about one another, it becomes painfully obvious that they’re not the soul mates they’d hoped they might be.

With Allison’s harried sister Debbie (Mann) and hen-pecked brother-in-law Pete (Rudd) the only parenting role models the young lovers have, things get even more confusing. Should they raise the baby together? What makes a happy lifetime partnership after all? A couple of drinks and one wild night later, they’ve got nine confusing months to figure it out…

GO HERE TO SEE THE HILARIOUS INTERNATIONAL POSTER… (more…)

In the Globes press room on Monday, Washington tried to set the record straight in regards to reports in October of an on-set incident that resulted from the alleged use of a homophobic slur toward co-star T.R. Knight.

After a reporter questioned the validity of the on-set incident, Washington denied his involvement saying, “No, I did not call T.R. a faggot. Never happened, never happened.”

In response to Washington’s use of the slur when addressing the situation last night, Heigl spoke out.

“I’m going to be really honest right now, he needs to just not speak in public. Period. I’m sorry, that did not need to be said, I’m not okay with it,” Katherine told Shaun.

When asked if she thought it was just an off-the-cuff remark, Heigl added, “I have no idea what it was, I just find it hurtful…I just feel like this is something that should be very much in house we need to deal with and it’s among us and the cast and crew and among Shonda [Rimes, show creator] and the producers.”

Heigl said that she hoped they work the situation out, making her loyalty to Knight, who plays Dr. George O’Malley on the hit show, clear.

“I don’t think [Washington] means it the way he comes off…But, T.R. is my best friend. I will throw down for that kid. I will beat you up. I will use every ounce of energy I have to take you down if you hurt his feelings,” she said.

When asked if she thought Knight was hurt by Washington’s comments she added, “I don’t see how you could not be under those circumstances. Drawing attention to it and saying the word again is just unnecessary.”

After making his comments in the press room, Washington came straight to Access Hollywood’s Billy Bush and Nancy O’Dell to explain.

“There is no way I could do anything so vile, and so horrible, not only to a castmate, but to a fellow human being,” he insisted.

When asked what spurred his comments on the October incident Washington told Bush, “It’s the truth. It did not happen. I was going to hire some other great shiny publicist, but you know what, God laid it on my heart to say it because it was so close. The reports were all wrong. It did not happen. I’m very disappointed that the New York Post actually wrote legitimately about something that was put in a tabloid about some angry person to get some validity to this, and then it just rippled.”

Washington also said that he and co-star Patrick Dempsey have moved beyond the October incident.

“I kiss Patrick Dempsey. We sing ‘Ebony and Ivory’ everyday since the so-called incident and it hasn’t come up. We purposely sing ‘Ebony and Ivory’ every night since October 9 and nobody has written about it,” he added.

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