WARRANT

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EXHIBIT 4.12

WARRANT NO. _____

THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT

OF 1933 0R ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,

OFFERED, PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS THERE IS AN EFFECTIVE

REGISTRATION STATEMENT UNDER SUCH ACT OR LAWS COVERING SUCH SECURITY OR THE

COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THIS SECURITY

(SATISFACTORY TO THE COMPANY AND ITS LEGAL COUNSEL) STATING THAT SUCH SALE.

TRANSFER. ASSIGNMENT, PLEDGE OR DISTRIBUTION IS EXEMPT FROM THE REGISTRATION AND

PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND ALL

APPLICABLE STATE SECURITIES LAWS.

WARRANT

TO PURCHASE

COMMON SHARES

OF

CAPELLA EDUCATION COMPANY

FOR VALUE RECEIVED, Legg Mason Wood Walker, Incorporated, a Maryland

corporation, is entitled to subscribe for and purchase from Capella Education

Company, a Minnesota corporation (the "Company"), up to One Hundred Thirty Five

Thousand Eighty Eight (135,088) duly authorized, fully paid and nonassessable

Common Shares of the Company, $.10 par value per share, or such greater or

lesser number of such shares as may be determined by application of the

anti-dilution provisions of this warrant, at the price of Seventeen and 10/100

Dollars ($17.10) per share, subject to adjustments as noted below (the "Warrant

Exercise Price").

This warrant is subject to the following provisions, terms and conditions:

1. Expiration. This warrant shall expire on the earlier of (i) May 11,

2005, or (ii) the second anniversary of the Company's initial public offering of

its Common Shares which is registered with the Securities and Exchange

Commission under the provisions of the Securities Act of 1933 (the "Act").

Subject to the foregoing, this warrant may be exercised, in whole or in part, by

the holder hereof at any time or from time to time prior to the expiration

hereof.

2. Exercise. The rights represented by this warrant may be exercised by

the holder hereof, in whole or in part, by written notice of exercise delivered

to the Company and by the surrender of this warrant (properly endorsed if

required) at the principal office of the Company and upon payment to it by

either (i) cash, certified check or bank draft of the purchase price for the

shares to be purchased, or (ii) delivery of certificates for the Company's

Common Shares already owned by the holder having a fair market value equal to

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the purchase price for the shares to be purchased. "Fair market value" per

Common Share on any date shall be (A) the average of the daily closing prices of

the Common Shares for the thirty (30) consecutive trading days preceding such

date on the principal national securities exchange or national securities market

on which the Common Shares are listed or admitted to trading or, (B) if not so

listed or admitted, the average of the medians of the highest reported bid and

lowest reported asked quotations for the Common Shares for each trading day

during such period as furnished by the National Association of Securities

Dealers, Inc. or its successor, or, (C) if not so listed, admitted or quoted, as

determined in good faith by the Company's Board of Directors using customary

valuation methods, provided that no representative, delegate or agent of the

holder on the Company's Board of Directors shall be entitled to vote on the

determination of such fair market value, and provided further that the Board of

Directors shall not be required to retain outside advisors in making its

determination. The shares to be purchased shall be deemed to be issued as of the

close of business on the date on which this warrant has been exercised by

payment to the Company of the Warrant Exercise Price. Certificates for the

shares so purchased, bearing the restrictive legend set forth at the beginning

of this warrant, shall be delivered to the holder within ten (10) days after the

rights represented by this warrant shall have been so exercised, and, unless

this warrant has expired, a new warrant representing the number of shares, if

any, with respect to which this warrant has not been exercised shall also be

delivered to the holder hereof within such time. No fractional shares shall be

issued upon the exercise of this warrant, but in lieu of any such fractional

share the Company shall make a cash payment therefor equal in amount to the

product of the applicable fraction multiplied by the current fair market value

per Common Share.

3. Right to Convert Warrant. The holder of this warrant shall have the

right to require the Company to convert this warrant (the "Conversion Right"),

in whole or in part, at any time prior to its expiration, into the Company's

Common Shares as provided for in this Section 3. Upon exercise of the Conversion

Right, the Company shall deliver to the holder (without payment by the holder of

any Warrant Exercise Price) that number of the Company's Common Shares equal to

the quotient obtained by dividing (i) the value of the warrant at the time the

Conversion Right is exercised (determined by subtracting the aggregate Warrant

Exercise Price for the shares subject to the warrant in effect immediately prior

to the exercise of the Conversion Right from the aggregate fair market value of

the shares subject to the warrant immediately prior to the exercise of the

Conversion Right) by (ii) the fair market value of one Common Share of the

Company immediately prior to the exercise of the Conversion Right and

multiplying the quotient so obtained by a fraction equal to the portion of this

Warrant which the holder desires to convert. For purposes hereof, "fair market

value" per Common Share shall be determined as provided in Section 2. The

Conversion Right may be exercised by the holder hereof, in whole or in part, by

written notice of exercise delivered to the Company and by the surrender of this

warrant (properly endorsed if required) at the principal office of the Company.

The shares to be issued upon exercise of the Conversion Right shall be deemed to

be issued as of the close of business on the date on which the Conversion Right

has been exercised by written notice and surrender of this warrant to the

Company. Certificates for the shares so issued, bearing the restrictive legend

set forth at the beginning of this warrant, together with cash in lieu of any

fractional

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share shall be delivered to the holder within ten (10) days after the Conversion

Right shall have been so exercised, and, unless this warrant has expired, a new

warrant representing the number of shares, if any, with respect to which the

Conversion Right has not been exercised shall also be delivered to the holder

hereof within such time. No fractional shares shall be issued upon the exercise

of the Conversion Right, but in lieu of any such fractional share the Company

shall make a cash payment therefor equal in amount to the product of the

applicable fraction multiplied by the current fair market value per Common

Share.

4. Covenants of the Company. The Company covenants and agrees that all

shares that may be issued upon the exercise of the rights represented by this

warrant shall, upon issuance, be duly authorized and issued, fully paid and

nonassessable shares. The Company further covenants and agrees that during the

period within which the rights represented by this warrant may be exercised, the

Company will at all times have authorized, and reserved for the purpose of issue

or transfer upon exercise of the subscription rights evidenced by this warrant,

a sufficient number of its Common Shares to provide for the exercise of the

rights represented by this warrant, and will not permit the par value, if any of

its Common Shares to exceed the Warrant Exercise Price. If the Company shall

list its Common Shares on any securities exchange it will, at its expense, list,

or obtain approval for listing upon issuance of, the Common Shares issuable

under this warrant. The Company shall similarly list, or obtain approval for

listing upon issuance of, any other security issuable under this warrant if such

other security has been listed on any securities exchange.

5. Adjustments to Warrant Exercise Price. The Warrant Exercise Price shall

be subject to adjustment from time to time as hereinafter provided in this

Section 5:

(a) If the Company at any time divides its outstanding Common Shares into

a greater number of shares (whether pursuant to a stock split, stock dividend or

otherwise), and conversely, if its outstanding Common Shares are combined into a

smaller number of shares, the Warrant Exercise Price in effect immediately prior

to such division or combination shall be proportionately adjusted to reflect the

reduction or increase in the value of each such Common Share.

(b) If any capital reorganization or reclassification of the capital stock

of the Company, or consolidation or merger of the Company with another

corporation, or the sale of all or substantially all of its assets to another

corporation shall be effected in such a way that holders of the Company's Common

Shares shall be entitled to receive stock, securities or assets with respect to

or in exchange for such Common Shares, then, as a condition of such

reorganization, reclassification, consolidation, merger or sale, the holder of

this warrant shall have the right to purchase and receive upon the basis and

upon the terms and conditions specified in this warrant and in lieu of the

Common Shares of the Company immediately theretofore purchasable and receivable

upon the exercise of the rights represented hereby, such shares of stock other

securities or assets as would have been issued or delivered to the holder of

this warrant if it had exercised this warrant and had received such Common

Shares prior to such reorganization, reclassification, consolidation, merger or

sale. The Company shall not effect any such consolidation, merger or sale,

unless prior to the consummation

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thereof the successor corporation (if other than the Company) resulting from

such consolidation or merger or the corporation purchasing such assets shall

assume by written instrument executed and mailed to the registered holder of

this warrant at the last address of such holder appearing on the books of the

Company, the obligation to deliver to such holder such shares of stock,

securities or assets as, in accordance with the foregoing provisions, such

holder may be entitled to purchase.

(c) Upon each adjustment of the Warrant Exercise Price, the holder of this

warrant shall thereafter be entitled to purchase, at the Warrant Exercise Price

resulting from such adjustment, the number of shares obtained by multiplying the

Warrant Exercise Price in effect immediately prior to such adjustment by the

number of shares purchasable pursuant hereto immediately prior to such

adjustment and dividing the product thereof by the Warrant Exercise Price

resulting from such adjustment.

(d) Upon any adjustment of the Warrant Exercise Price, the Company shall

give written notice thereof, by first class mail, postage prepaid, addressed to

the registered holder of this warrant at the address of such holder as shown on

the books of the Company, which notice shall state the Warrant Exercise Price

resulting from such adjustment and the increase or decrease, if any, in the

number of shares purchasable at such price upon the exercise of this warrant,

setting forth in reasonable detail the method of calculation and the facts upon

which such calculation is based.

6. No Voting_Rights. This warrant shall not entitle the holder hereof to

any voting rights or other rights as a shareholder of the Company.

7. Registration Rights. If, at any time commencing after the date hereof,

the Company proposes to register any of its securities for money under the Act,

other than pursuant to Form S-4, Form S-8 or a comparable registration statement

and other than in connection with demand registrations initiated by other

security holders of the Company whose rights exclude or restrict (to the extent

of such restriction) participation by other holders of registration rights, it

will give written notice by registered mail, at least thirty (30) days prior to

the filing of each such registration statement to the holder of this warrant

and/or the Common Shares and any other securities issuable upon exercise of this

warrant (collectively, the "warrant securities") of its intention to do so. If

the holder of this warrant and/or warrant securities notifies the Company within

twenty (20) business days after receipt of any such notice of its desire to

include any such securities in such proposed registration statement, the Company

sh